Those Extra Bucks You May Have To Spend On Your Home Loan
Suppose you see a newspaper advertisement that a particular 1,500-square-foot property is up for sale at Rs 3,000 per sq ft. You calculate the total cost of this property at Rs 45 lakh and plan to go ahead with the purchase. What you possibly don't count in your eagerness are a number other charges that you might have to pay if you want to fund your purchase by taking a home loan.
Makaan IQ lists some of the costs you must factor in before applying for a home loan:
Administrative fee: The different paper work and the notarisation of certain documents add to the loan cost.
Cheque-bounce charges: Penalty is levied by the bank in case of a bounced cheque. Customers should know that the loan application may get rejected by the lender if the processing fee cheque bounces.
Credit score report: You might want to know your credit score before the appraisal of the loan. In case you approach the nearest branch of your bank, you will be asked to shell out extra money to procure the report.
Legal and technical fees: Most banks outsource the legal and technical services to study and validate legal documents and the market valuation of the property and pass on the charges to customers.
Repayment track of loan account: If you get your loan transferred from one bank to another, you will be required to submit the repayment track of the loan, along with some other relevant documents, to the new bank. If you lose these papers, you will be charged for the photocopies. It is always advisable to get the original documents photocopied.
Re-sanction charges: If the applicant does not take the loan after it is sanctioned, and the sanction letter becomes invalid, the applicant has to incur the loan processing charges, along with the processing fee, to get the loan re-sanctioned.
Late payment charges: Any delay in the payment of the equated monthly instalment (EMI) attracts penalty. It can be a costly affair as some banks charge a fixed amount and a fixed percentage of the amount of instalment due.
Stamp Duty and registration charges: While stamp duty is a tax payable on certain legal documents, registration charges are the amount you have to pay for submission of documents needed to be registered to grant legal ownership by the authority concerned. These charges vary from state to state and are based on the amount calculated on the basis of the super built-up area. The borrower gives an undertaking that he has deposited the title documents of the property in the bank to secure his loan. This undertaking is also known as the Memorandum of Deposit of Title Deed.
Charge for the gap between EMI and disbursement: There is always a gap between the time of disbursement of the loan and the time when the EMI payment starts. There is a certain interest, known as “broken period interest”, that is levied by the lender during this period.
Penalty on pre-payment: Though pre-payment charges have been waived for floating-rate home loans, service tax, along with pre-payment penalty, still exists. It is the amount that the borrower has to pay in case he pays off the loan before the completion of the tenure.
Switching loan tenure: Some banks and financial institutions charge fees for a change in the loan tenure.
Conversion fee: Banks offer existing customers an option to reduce the applicable loan interest by changing the spread through the conversion facility. For instance, you took a loan at 12 per cent interest rate -- a base rate of 10 per cent, and a mark-up of two per cent. Over a period of time, the bank reduced the mark-up by a percentage point for new customers. Now, the rate of loan interest offered by the bank is 11 per cent. As this change is not applicable to old customers, banks charge about one per cent of the outstanding loan amount as a fee to extend this scheme to you.
It is always prudent to construct a budget that takes into account all the above mentioned costs, leaving no room for surprises at a later stage.