Getting a home loan is not all that difficult today. You can apply for one online and get quick approval for it. However, there are certain extra fees and charges that every home loan brings with it, and you should be aware of these. Not everyone reads the terms and conditions carefully. That is where you may miss the details about these charges. To make things simpler, we have listed the six most common payouts associated with home loans.
Every home loan provider charges a fee for the documents it processes. This is about 2% of the loan amount. This fee has to be paid while applying for the loan. You should note that the lender will not refund this fee if the loan is rejected.
Many people confuse this fee with the processing fee. But the two are different. The lender charges the administrative fee to carry out administrative tasks during the loan approval period. The fee covers the back-end work done by the lender while processing a home loan.
Not all lenders levy this charge, but a handful still ask for it. The Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI) is based in New Delhi. They carry out checks to prevent frauds arising from multiple loans taken for the same property. Banks usually pay the fee to CERSAI directly, and then recover it from the borrower in the form of the CERSAI charge.
If you repay your loan before the actual tenure, you will incur a prepayment fee. Borrowers choose to prepay their home loans for various reasons; they may want to become debt-free faster or reduce the interest burden. Check the prepayment fee first and close the loan if you must.
Late payment penalty
Let’s say a post-dated cheque bounces or, maybe you fail to electronically transfer an EMI for one month. The home loan provider will charge you a late payment penalty. Lenders usually charge about 2% of the EMI, plus the applicable interest as late payment fees.
You pay a large sum of money in the form of interest when you repay your home loan. This interest is part of the EMIs you pay monthly. Because of the interest, you end up paying the lender a higher amount than what you borrowed. Lenders charge interest fees for giving you the loan, thus enabling you to buy the property.
These are the most common payouts associated with home loans. Be aware of these charges and you will understand why your loan costs as much as it does. This will help you to do the calculations in a more efficient manner.