Home loans are loans secured for buying a residential property. These high LTV ratio loans allow loan borrowers to secure up to 85% of the pledged collateral’s current market value as a loan. The loan is repaid over a period of 10 to 30 years. Housing loan interest rates tend to be low, making home loans an ideal option if you are experiencing a shortage of funds. Want to secure your home purchase deal with an advance payment as quickly as possible. Moreover, the home loan tax benefits available furthermore add to the demand for these loans. If you plan on securing a home loan soon, make sure to do your research and find the best home loans for you.
Below we discuss the various additional fees and charges that lenders apply and that add to the cost of borrowing funds. To secure the best home loans, applicants must also read about these charges. Not just the housing loan interest rate being offered and the home loan amount being sanctioned.
Best Home Loans in India: Fees and Charges You Must Know About and Compare
1. Processing Fee: When you apply for housing finance, the bank or the NBFC that you apply to will apply a processing fee. This processing fee usually goes towards covering the costs associated with maintaining and taking forward the home loan application process. The home loan processing fee ranges from 0.25% to 3% of the final home loan amount and consequently, can be a huge amount.
2. Administrative Fee: Before lenders sanction you a loan, they check all the property documents and other things to make sure everything is in order and legally alright. For this, most lenders hire a legal expert to go through the documents and a technical expert to make sure the property that you are investing in has been built keeping all rules and regulations in mind. The administrative fee goes towards paying these legal and technical experts.
3. Legal Fee: Lenders decide the loan amount to be sanctioned after looking into several different things and one of the most important of these things is the market value of the property. Very often, banks and NBFCs also hire experts to assess the fair market value of the property being pledged as collateral.
4. Prepayment and Foreclosure Charges: This is one of the most important costs that loan borrowers must assess while comparing lenders. A prepayment fee is an additional amount that you must pay when you want to make a lump sum payment towards your loan account. Foreclosure is when you want to pay off the entire loan amount pending and close the loan amount. Individuals on floating housing loan interest rate can prepay and foreclose their loan amount at any time without paying any fee. Borrowers who have availed of a fixed interest rate must pay a prepayment and foreclosure fee, which is charged as a percentage of the remaining loan amount. Borrowers should always compare the prepayment and foreclosure fees while deciding the lender to go with.
5. Late Payment Fee: Lenders prefer lending money to borrowers who repay on time. They want to avoid the risk of loan defaults at all costs. The late payment fee is the fee that lenders charge on late payments. It can range from 2% to 4%. Other than the late payment fee, borrowers must also compare the cheque bounce charges, which generally range from Rs.200 to Rs.500.
Other than using a home loan calculator to compare EMIs, the total interest payout on one’s loan, and the total cost of borrowing funds, borrowers must also compare the additional costs and charges discussed above. Doing so would make it much easier for you to choose the best home loan for you. Borrowers must also make every effort to secure a low housing loan interest rate to keep loan repayment easy and comfortable.
A high CIBIL score, low LTV ratio, low FOIR, and smart use of the home loan eligibility calculator to calculate the loan amount that one is eligible for and apply for the same are some of the easy ways to secure a low interest rate home loan.