Hidden charges are something that everyone should know about before taking a home loan. There are no visible factors determining the hidden charges. Also, the latter differ among banks. Adding to the problem, customers have to pay interest on these charges. Therefore, these charges can further damage the financial planning of a family.
The blog enlists 15 hidden charges customers must pay on a home loan:
1. Documentation charges
Documentation charges are fixed and often go unnoticed when the applicant needs to read the documents carefully. The banks desire the amount for collecting required documents and Electronic Clearing Services activation. Moreover, they also charge for the preparation of loan agreement paperwork. Documentation charges cost around INR 1000 to INR 5000.
2. Technical charges
Technical charges are taken to determine the value of the property. Then, the expert determines the worth of the property to approve the required home loan. In the case of under-construction property, assessment is checked by convenience and accommodation service. Finally, the inspection by an expert helps determine the current market value associated with the property.
The worth of the property should be equal to the amount of loan required by the customer.
3. Legal charges
A legal expert is appointed to verify all the records of property provided by the customer. In addition, legal experts tried to find any fraud associated with the property's history. The assessment includes records of ownership, inheritance, previous sale, government, etc. Legal charges are also fixed and cost around INR 5,000 to INR 10,000.
4. Pre-payment charges
Pre-payment charges apply under three conditions. First, it can be charged under special schemes and on fixed-rate home loans. The bank may also levy it if the advance is acquired by external sources and paid to the bank.
5. Charge on switching rate of interest
The conversion fee is applicable when the applicant changes the rate of interest. Although the change is vital to decrease the expenditure, the conversion is chargeable. The fee amount is calculated on the loan amount at 0.5 to 1%.
6. Charge on loan duration
The situation may arise when you want to increase or decrease the loan tenure based on your financial condition. This change is also chargeable by the banks. Moreover, the continuation of the same loan tenure is also payable in a few banks.
7. Processing fees
Approval of the loan requires processing fees to cover the expense incurred. Chargeable at around 0.5 to 1% of the loan amount, it can sanction the loan before finalising the property.
8. Late payment charges
In case of inability to pay the EMI on time, you need to pay the additional charges. Late payment charge includes two components, a fixed cost and a percentage of the monthly interest.
9. Recovery charges
The lender poses recovery charges from the customer under two situations. Firstly on late EMI, where the calculation of new interests and EMI are to be performed again. The recalculation includes the amount to recover the missed payment.
Secondly, the bank has to auction the property in financially challenging circumstances for the customer. It arises when the customer cannot complete the EMI payment to the bank on the loan against the property. It levies the charges of auction, paperwork and arrangements upon the customer.
10. Refinancing charges
Customers look forward to refinancing their loan against property to save costs or meet expenses. Refinancing involves transferring the loan to a different lender. The old lender charges a particular percentage of the outstanding loan.
Conclusion
Home loans are the preferred choice by many to get a house. Monthly payments instead of a one-time lump sum and refinancing facilities ensure good budget planning for families. However, interest rates are something every person fears. Hidden charges, with interest payable on them, add to the nightmare of middle-income families. A clear idea of every aspect helps in wise decisions and financial planning.
