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Decoding your home loan fees and charges

  • Highlights

  • Interest rate is the cost of borrowing funds

  • You also have to pay processing fees and secure fees

  • Look for low, or nil prepayment and foreclosure fees

  • Find out the penal interest and EMI bounce charges

Every home loan has certain charges and fees associated with it. It is important for you to know about these charges so that you select a loan that is affordable, and ensure easier repayment. Knowing the extra costs will also help you plan repayment better.

Take a look at the common charges that accompany a home loan.

Interest rate

This is the cost that you pay for getting access to funds. It varies from lender to lender, so ensure that you do your research and select a loan with a low interest rate.

When you take a interest rate on Home Loan, you can benefit from a nominal rate of interest, along with easy prepayment, flexible tenor and a high loan amount.

Processing Fees

This fees goes up to 1% to 2% of the loan amount and consists of all the costs of processing the loan. This includes administrative costs such as examining your application, studying your financial statements, vetting the property and verifying your documents.

This category covers the charges of printing and posting your loan’s principal and interest statements. Ideally, you should ensure that the lender is charging you a minimal amount for this facility, if at all. Look for a lender that offers these statements online, such as Bajaj Finserv, so you don’t have to pay these charges.

EMI Bounce Charges

There could be a situation where your EMI cheque bounces. This usually happens because of insufficient funds in your bank account. As a penalty, you have to pay a one-time bounce charge for each bounce. Usually, this amount is around Rs.2,500.
Additional Read: What is MCLR
Additional Read:
How Credit Score Can Determine Your Home Loan EMIs

Penal Interest

This is a penalty that you have to pay in case you make a late payment or default on paying EMIs or the loan itself. This is calculated as a percentage and averages at around 2% per month.

Secure Fee

This is a security fee that is charged by lenders who offer online services. The lender uses this amount to maintain online payment systems and gateways, and keep them safe from hackers and malware.

Home Loan

Foreclosure Charges

This consists of the charges that you have to pay to foreclose your loan. It protects the lender’s interests in case you decide to close the loan before the tenor ends. You should seek a low foreclosure charge to ensure that you can close the loan without spending too much. For example, if you have a Home Loan with a floating interest rate from Bajaj Finserv, you don’t have to pay any foreclosure charges.
Additional Read: Home Loan Without Down Payment

Prepayment Charges

These are charges you have to pay when you make a prepayment towards the loan’s principal. Again, you must ensure that this amount is minimal. For example, lenders like Bajaj Finserv don’t charge individual borrowers any fee for making a prepayment.

Additional Read: 4 Home Loan Repayment Options To Choose From

It is important for you to check home loan interest rate charges before signing a loan document. This will help you understand how much you have to pay in total and organise your finances accordingly.

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The material contained in this site and on associated web pages is general information and it is not intended to be advice on any particular matter. Subscribers and users should seek professional advice before acting on the basis of the information contained herein. The decision with respect to any financial product or opportunity or nature or suitability or choice or the viability of any product or service shall always be sole responsibility and decision of the subscriber and user.

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