In addition to the monthly instalment, there are numerous other charges associated with availing of a home loan. These broadly encompass legal fees, administrative charges, processing fees, late fees, penalties, service charges and so on. Banks and other financial organisations are known to levy several types of fees at various stages of your loan tenor. It is important to be aware of these differential rates as they can significantly raise the overall cost of credit. To know more about what to expect from your home loan fees and charges, prominent among which is your home loan processing fee, read the following article. 

What Is a Home Loan Processing Fee?

Lending institutions may impose a fee to process your loan application for initiating a variety of functions such as credit checks, employment and income verification, property evaluation, underwriting, etc. The processing charges are normally levied at 0.25% to 2% of the borrower’s total loan amount, although the exact percentage may vary widely from lender to lender. Furthermore, there is an additional GST attached to this fee. 

Basic Home Loan Fees and Charges 

Your projected home loan EMI is primarily based on the applicable home loan interest rates offered by lenders. However, over and above this substantial expense, borrowers must also factor in other relevant housing loan charges to ascertain the exact monetary outgo. You can access an online home loan calculator that can accurately tell you how to calculate home loan EMI easily. 

Here are some standard fees that typically apply to house loans:

Mortgage Down Payment

Lenders do not fund the entire cost of your property when you opt for a housing loan. If your home is valued at Rs.80 Lakh, you may be eligible for a loan up to Rs.70 Lakh based on the Reserve Bank of India’s prescribed loan-to-value (LTV) ratio, which all lenders are mandated to follow. 

For example, in the case of housing loans up to Rs.30 Lakh, the LTV might be as high as 90%. This means that for a property priced at Rs.30 Lakh or lower, you will need to pay 10% of the total cost upfront from your own resources. Similarly, the LTV is around 80% when obtaining home loans in the range of Rs.30 Lakh to Rs.75 Lakh, signifying a 20% down payment. For loans exceeding Rs.75 Lakh, the LTV stands at 75%. 

Notwithstanding the stipulated LTV norms, your sanctioned house loan amount is dependent on several key factors such as your earning potential, age, credit standing, employment status, outstanding debts and more. It is the vital combination of your personal, professional and property profile that will directly influence the necessary down payment amount.

Document Verification Fee

House loans come with many requisite costs like the ones incurred during a home loan balance transfer, legal fees, administrative fees and late payment penalties, to name a few. Most lenders will provide a comprehensive chart of payable charges that the borrower is responsible for in the loan agreement. It is in your best interests to verify this list to avoid any future hassles. The most common documentation charges, apart from the usual processing fees, are:

Legal and Technical Verification Fees

This includes fees undertaken for the verification of technical and legal documents of your property. 

Property Evaluation Charges

As the name suggests, evaluation charges cover the complete assessment procedure of the property aimed at determining its current market value. 

Registration and Stamp Duty

Variations exist in the stamp duty fees for registering property documents as fixed by the governments of each state. 

Prepayment or Foreclosure Fees

Lending institutions may impose an early repayment or foreclosure penalty if borrowers seek to pay off the house loan before the end of their agreed term. 

Summing Up

It is important to bear in mind that processing fees are just one part of your total house loan expenditure. In certain instances, lenders may waive processing fees and/or certain charges when you apply for an online home loan if you hold a favourable credit profile. They may also forego specific rates during festive occasions, especially for particular customer segments, such as first-time homeowners. Since these charges vary based on the lender, the type of loan and its quantum, borrowers should closely examine loan offers from other lending institutions to appraise the effective borrowing costs. A viable financing plan can maximise the income tax benefit on home loans enabling optimal credit management.