15 Home Loan Hidden Charges You Must Ask Your Bank
12 Aug 2019
In today’s age of inflation, land and property prices have gone through the roof. Hence, it goes without saying that availing a home loan is the most convenient option to buy a property. However, in a desperate bid to buy a home, many buyers’ sign up for home loans without knowing anything about the various hidden charges involved. In many cases, lenders too may not be upfront of the different charges involved. Taking up a home loan is a long term commitment, and a thorough understanding of various home loan charges is essential. Here’s a comprehensive list of the various hidden home loan charges you must know about:
MOTD Charges - Memorandum of Deposit of Title Deed or MOTD is an undertaking provided by the applicant which states that the property has been pledged to the bank as per the customer’s own will to obtain a Home Loan. This document requires a stamp duty, which varies between 0.1% and 0.2% of the final loan amount.
Inspection Fees – Lenders conduct a thorough inspection during the valuation process. The costs of hiring valuation experts are borne by the customer.
Administration Charges – This charge is generally not included with the processing fee. Some lenders require you to pay additional administration charges to ensure that all the costs of processing the application are completely recovered. Even if the processing fee is waived off, the administration charges will be applicable.
Documentation Charges – Home loans involve extensive documentation including the loan agreement and the MOTD. The charges incurred by the lender in order to complete this documentation process are referred to as documentation charges.
Conversion Fees – Most home loans have a floating rate of interest. However, if the base interest rate reduces over the years, banks allow customers to switch to a new rate of interest by paying a conversion fee.
Document Retrieval Charges – These charges are only applicable for completion of the loan tenure or on pre-closure of the loan. This are levied to cover the costs of transferring the property documents to the borrower from the lender’s central document repository.
Legal Fees – Lenders hire legal experts to fulfil requirements such as valuation of the property or the validation of the different documents etc. Hence, the charges acquired by the lender for the same will need to be borne by the applicant, which are nothing but the legal fees. Ensure that you are aware of these charges before applying for a home loan.
Tenure Change Charges – Home loan lenders allow alteration of the EMI payable by changing the loan tenor. In case you have additional funds, you can reduce the loan tenure and pay off the home loan faster. However, to do that, you will have to pay the tenure change charges.
Loan Package Change Charges – Lenders also allow customers to change their home loan package. For instance, you can change your fixed interest rate home loan to a floating rate home loan. The Loan Package Charge is generally 1% of the loan amount and may vary for different lenders.
Document Copy Charges – It is always a good practice to keep a few copies of all your property documents before you submit them to your lender. This is important as you will need to submit the original documents to the bank; it may become a hassle to obtain them for other purposes later. If you don’t have the original copy, the bank will levy the document copy charges for every copy that you wish to take. However, by taking copies of all the documents in advance, you can avoid these charges.
Prepayment Charges – Most home loans have provisions for pre-payment, i.e. closure of the loan before the tenure. You can either make part pre-payment or pay off the entire home loan amount. However, pre-payment means losses for the lender due to the loss of interest. Hence, the lender will levy pre-payment charges on pre-payment of home loan to make up for the losses.
Statement of Account Charges – Each year, the lender provides an annual account statement free of cost. However, if you happen to lose it, you will have to pay a fee to get another one. Your lender may charge up to Rs 500 to provide another statement of account.
Late Payment Charges – Like any other loans, home loans also require timely payment of the monthly instalments. In case of late payment, the lender will charge you a fixed base penalty rate along with a percentage of the loan amount, which is outstanding as the late payment fees.
Recovery Charges – Recovery charges will only be applicable if you default on your home loan. The loan recovery process can be expensive for the bank, especially if the property needs to be auctioned. All of the additional charges will be recovered from the borrower.
Document List Charges – If you want to check the list of the original documents that you have submitted to the bank after a home loan has been sanctioned, you will have to pay a fee known as Document List Charges. So make sure to submit all the documents carefully to avoid this fee.
Being aware of these charges will ensure that you don’t get any unpleasant surprises once your home loan has been sanctioned and disbursed. However, with Bajaj Finserv Home loan, you don’t have to worry about any hidden charges. We mention all the applicable charges in the loan documents so that our customers are aware of the same before signing the dotted line. Moreover, by opting for a Bajaj Finserv Online Home Loan, you can enjoy multiple benefits like minimum documentation and processing time, flexible tenor, balance transfer facility, loan top-ups, part-prepayments and much more. To apply or know more about Bajaj Finserv Home Loan, visit Finserv Markets.
"Finserv MARKETS, a subsidiary of Bajaj Finserv, is a one-stop digital marketplace that has been created for consumers on the go. It offers 500+ financial and lifestyle products, all at one place. At Finserv MARKETS, we understand that every individual is different. And that’s why we have invested in creating a proposition – Offers You Value. A value proposition that ensures you get offers which are tailor made for you. We also offer an amazing product range and unique set of online offers across Loans, Insurance, Investment, Payments and an exclusive EMI store. Be it in helping you achieve your financial life goals or offering you the latest gadgets, we strive to offer what you are looking for. From simple and fast loan application processes to seamless and hassle-free claim-settlements, from no cost EMIs to 4 hours product delivery, we work towards fulfilling all your personal and financial needs. What’s more! Now enjoy the same benefits in just one click with our Finserv MARKETS App."