It’s a wise decision to opt for a home loan to realize the dream of owning a home. A home loan allows you to become a home owner at a relatively young age and helps you invest in one of the best assets available today; property! However, ensuring that your home loan journey is a smooth one requires a substantial amount of planning & calculation. Most people only take into consideration the cost of their EMI when planning their home loan-related finances. However, there are some other charges that you need to cover to in order to ensure your home loan goes smoothly.
The first is the home loan processing fees
One of the most important charges you need to take into consideration is the processing fees of your home loan. This fee is charge the insurance company levies against your home loan application to verify your documents and complete other loan-related procedures. It can range from 0.5% to 1% of the loan amount you’ve applied for. Some companies cap this amount to Rs. 5000 & some even skip this fee in order to attract more customers. If you opt for a lender that requires you home loan processing fees, it’s important to remember that this amount is no refunded even if you’re application is rejected.
Technical & legal verification fees
When you opt for a home loan, there are a lot of documents that need to be verified. Also, the property you’re planning to purchase need to be inspected and evaluated to ensure you’re not borrowing more than you need. The cost of these formalities is covered under the technical & legal fees. Most companies include this cost as part of the home loan processing fee, but other charge you separately.
Next is pre-payment fee
If you decided pay your loan amount before the tenure comes to an end, you are choosing to pre-pay your loan. Most companies levy a pre-payment charge if you wish to this and the extent of this charge varies from one lender to the next but is generally around 2% of the outstanding amount. Again, just like home loan processing fees, some companies offer to skip this charge and RBI has even announced that there will no longer be any pre-payment charges on loan with floating interest rates. So make it a point to find out your company’s pre-payment charges.
MoDT or Memorandum for Deposit of Title deed is another mandatory charge most lenders will require you pay with your home loan. It is undertaking that you give stating you are depositing the title documents of your property with the bank at your own free will in return for a loan. This understanding needs to be registered with stamp duty, this is stamp duty charge is generally 0.1 or 0.2 percent of the loan amount.
These were some basic costs you need to take into consideration while planning for your home loan. Speak to a financial expert to know if there any other charges you will need to pay that are specific to your home loan. All the best!