Home loan charges: Everyone dreams of having their own home. A home is the biggest purchase of any person’s life. Therefore, most people take a home loan while buying a house. Home loan is the longest term loan. In a home loan, you have to pay a lot of money in the form of interest in the long term. Therefore, complete investigation should be done while taking a home loan. There are many other charges levied along with the home loan, about which you should be aware. Let us know what these charges are.
Mortgage Deed Fees
This is a major charge that you have to pay when choosing a home loan. It is usually a percentage of the home loan amount and forms a major part of the total fee amount paid to avail the loan. Some institutions waive this charge to make the home loan product more attractive.
legal fees
Financial institutions usually appoint external lawyers to investigate the legal status of the property. The fees charged by the lawyers for this are recovered by the financial institutions from their clients. However, if the property has already been legally approved by the institution, then this charge is not levied.
Commitment Fee
Some institutions charge a commitment fee if the loan is not disbursed within a specified time period after the loan is processed and approved. This is a fee that is charged on undisbursed loans. For example, for construction loans, the project completion stage is crucial for loan disbursement. The lending institutions keep this line of credit open for you but charge a certain amount so that you can avail this loan in the future. This fee is usually charged as a percentage of the difference between the sanctioned and disbursed amount.
Prepayment penalty
By repaying the loan before time, the bank loses the interest rate, so to compensate for this loss to some extent, the bank charges a penalty. These charges are different in different banks. This also depends on the type of loan. However, RBI has instructed all banks not to charge prepayment penalty on home loans taken on floating interest rate. For fixed rate home loans, a prepayment penalty is charged on a flat rate which is up to 2% of the amount to be paid upfront. So, if you want to prepay your home loan, you will have to consider this factor as well.