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Home Loan Fees That All Borrowers Must Be Aware Of

Are you aware of the fees involved when you take a home loan? There are fees to be paid both before the loan disbursement and during the life of the home loan. Here we help you understand what these fees are and why your lender might levy all or some of these fees.

Fees before loan disbursement

1. Processing fee: The processing fee is charged when you apply for a home loan for processing your loan application. This fee is mostly non-refundable and lenders take a cheque for this amount. Typically, this fee is either 0.5% of the loan amount, or a fixed amount set by the lender, whichever is lower. Each lender can have its own fee structure.


2. Legal fee: Lenders charge this fee to the borrower for verifying the legal status of the property. Legal fee varies from lender to lender, but typically it ranges from Rs. 850 to Rs. 1,000.


3. Tripartite agreement fee: The tripartite agreement is an agreement between the borrower, builder and the lender signifying that the property belongs to the borrower. The borrower has to pay the fee to draft this agreement. It normally ranges from Rs. 100 to Rs. 200.

Fees after loan disbursement

1. Delayed payment and cheque bounce fees: These fees are levied if you make the EMI payment after the due date. This could happen if your post-dated cheque (PDC) bounces for any reason.


2. Prepayment charge: This is the penalty that a borrower has to pay for making any extra payments in addition to their EMI towards the loan account. This can happen when a borrower is sometimes in a position to pay more than the regular instalments. Until recently, banks used to charge a penalty for part repayments. However, most lenders now waive off this fee unless the lump sum payment being made is a significant percentage of the outstanding loan amount.


3. Foreclosure charge: A foreclosure fee can be charged when the borrower decides to pay the entire outstanding loan balance before the actual maturity of the loan, or if borrower transfers the principal outstanding to another lender. Typically, all banks both private and public sector banks levy a foreclosure charge of 1% to 2%. However, in some cases, public sector banks do no levy any surcharge. Also, in case you are paying off the loan from your own funds, lenders might not levy this fee.


4. Duplicate statement charge: Your lender posts you an annual statement detailing the principal repayment and interest paid during the year. You need this statement for tax deduction purposes. If you happen to lose this statement, you can be charged up to Rs. 200 for a duplicate statement.

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