Top 5 Home Loan Charges

By Adhil Shetty | February 18, 2017

Top 5 Home Loan Charges

When looking to buy a house, the price of the property is one of the first things you check to find out if it fits into your budget. Next, you’ll probably look at the interest rate on your Home Loan.

However, you have to remember that the costs don’t end there. There are additional costs that could scale up your cost of acquisition. While some charges are commonly known, some are not so obvious. So, while weighing the costs of your Home Loan, don’t just look at the interest rates.

Here are some charges associated with Home Loans that you must consider while buying a house.

Memorandum of deposit of title deed (MOD) charges

This charge is associated with mortgaging of the property and is one of the most significant additional costs involved when taking a Home Loan. Banks typically charge between 0.1 and 0.5% of the loan amount as an MOD fee. Borrowers need to submit the documents of the property with the bank to get the loan and this practice ensures that the mortgaged property is not sold fraudulently. It also deters multiple mortgaging of the same property. If your Home Loan amount is Rs. 50 lakhs, you would have to cough up Rs. 25,000 as an MOD fee.

Processing fees

This fee is charged for processing the loan application and is applied even if the loan doesn’t get sanctioned. The fee usually ranges from 0.5% to 1% of the loan amount. However, banks sometimes set a ceiling on the processing fee. This charge is levied irrespective of whether the loan gets sanctioned or not and is non-refundable. Often banks come up with a scheme of ‘zero processing fees’ to attract customers.

Additional Reading: How To Reduce Interest Rate Costs On A Home Loan

Loan conversion fees

With the interest rates falling, people are currently converting their Home Loans to floating interest rates. But borrowers need to keep in mind that if they convert loans with a fixed interest rate to a floating rate, a hefty penalty is levied on the outstanding amount. The penalty ranges from 0.5% to 1.5%. For example, if your outstanding loan amount is Rs. 50 lakhs, you would be charged Rs. 50,000 (@1%) for shifting to a floating rate system. You must keep the penalty charges in mind before going for such conversions.

Legal and technical fees

Banks also charge legal and technical fees which are directed towards the cost incurred in getting legal and technical opinions from experts before sanctioning the loan. The charges are around Rs. 5,000 to Rs. 10,000. These charges are sometimes included in the processing fees. However, if the banks offer loans with ‘zero processing fees’, these charges are levied separately. You can negotiate with your bank to reduce the amount.

Additional Reading: Hidden Home Loan Tax Incentives

Fees for list of documents (LOD)

At the time of issuing a Home Loan, banks take all the original documents of the mortgaged property. Going forward, if the borrower requires a copy of these documents, banks may charge LOD fees, which range between Rs. 200 and Rs. 500. So, it is highly recommended that you keep a copy of all the documents before giving them to the bank to avoid such charges in future.

Additional Reading: All About Your Home Down Payment

Other charges

Apart from the above-mentioned charges, banks may charge late payment fees if the EMI is delayed and a penalty if the loan tenure is increased or decreased. They may also charge fees for periodical statements if you request for it more than a certain number of times. All of these lesser known charges add up to form your borrowing cost. So, make sure you go through the terms and conditions well before you decide on a loan.

Home-buying is a complicated process with many little moving parts. It’s important not to be caught off-guard by the various expenses that crop up during the buying process. This list of Home Loan charges will help you make an informed decision while calculating your loan requirements.

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.
Category: Home Loans Msn Yahoo

About Adhil Shetty

Adhil Shetty is the Founder and serves as the Chief Executive Officer of BankBazaar.com. Adhil has a Master’s degree in International Relations with a specialization in International Finance and Business from Columbia University in the City of New York, and a Bachelor’s degree in Engineering from the College of Engineering Guindy, Anna University. Adhil is an expert in Personal Finance (Car loan/Home loan and personal loan) and he majorly consults on investment and spends rationalization for the Indian loan borrowers. His guidance is number based with real time interest rate calculations and hence useful for consumer’s real time query.

2 thoughts on “Top 5 Home Loan Charges

  1. V.K.Subramanian

    We have taken a NRI housing loan from SBI. They have approved and given the loan
    Now they are asking for a MOD to be registered at the R.EGISTER OFFICE and given to them.
    The loan is taken by my daughter in law by extending power of attorney to her mother in law ( my wife )
    For registering we have to pay a fees of Rs 40K approximately.
    For registering the R.O. is asking for live certificates?
    What will happen if I don’t register and give it?
    Live certificates s it necessary? In UK the doctors are not aware of it
    Please help with your comments

    Reply
    1. Team BankBazaar

      Hi Mr. Subramanian,

      Due to the specific nature of your question, we would advise you to get in touch with a financial adviser.

      Cheers,
      Team BankBazaar

      Reply

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