Navigating Charges Associated with Home Loans and Loan Against Property – Part 1 of 2

Securing a home loan or a loan against property, whether initiating a new loan or transferring the balance from an existing one, involves a multitude of charges. While borrowers typically focus on interest rates, tenure, and EMIs, these charges often escape attention.

These overlooked fees can significantly impact a borrowers total expenditure, particularly at the loans inception. This initial article, part of a two-part series, sheds light on the charges tied to a new home loan. The upcoming second article will delve into charges related to balance transfers from existing loans.

Application fees or Login fees

These are the charges levied by lenders when a borrower initiates the loan application process for a home loans or loan against property in India. This upfront cost covers the initial expenses associated with processing the loan request, such as document and legal verification, and property technical evaluation. The application fee is typically non-refundable, regardless of whether the loan is approved or not.
Typical Application or Login fees: Rs 2900 to Rs 7900 per application

Processing Fees

Processing fees are charges imposed by lenders to cover the costs associated with evaluating and processing the loan request. Specifically applicable to home loans or loans against property in India, these fees contribute to administrative expenses, credit evaluation, third-party assessments, and other procedural aspects. Processing fees are typically a percentage of the loan amount. Some banks and Housing finance companies in India adjust the application fees as part of the processing fees in the case the loan has been successfully disbursed
Typical Application or Login fees: Rs 10,000-40,000 per application. Sometimes includes Application fees or Login fees.

Insurance

Most lending financial institutions in India expect the applicants to also get insurance for their loans – either term insurance or a home loan insurance or both.
Home Loan Insurance is a protective plan ensuring repayment in case of unforeseen events like death or accident, reducing coverage with the loan amount. If the borrower dies during the loan tenure, the outstanding amount is settled. Premium depends on loan details and borrowers information.
Term Insurance covers all liabilities with a fixed sum assured, providing financial support to nominees. Coverage remains constant, allowing settlement of loans. Both insurances can be purchased based on specific criteria.
To save costs, individuals can opt for private insurance based on lenders coverage criteria, ensuring comprehensive protection for home loans or mortgages.
Typical insurance cost: 0.5-3% of loan amount

Charges that vary by state & lender type:

Stamp duty

Typically, lenders pass the stamp duty costs to the borrower at cost. Stamp duty costs cover the Government in India levied costs on legal documents, including property transactions and loan agreements to make them legally valid.
Typical stamp duty: Vary by state and gender.

Equitable mortgage declaration

Lending institutions also charge borrowers for the legal documentation with the sub-registrar in which a property owner acknowledges that they have pledged their property as security for a loan without transferring the property title. This declaration facilitates the creation of a mortgage on the property, providing the lender with a security interest.Typical charges: Vary by state, ranging around 0.1-0.25% of the loan amount.

What should NOT be charged and NOT part of your loan fees:

Cash payment to intermediaries

Intermediaries, including brokers and selling agents, may approach you with promises of exclusive insights into streamlining loan processes with financial institutions. They typically demand cash payments ranging from Rs 5,000-50,000 or 5-10% upfront to facilitate your loan application.

However, many such intermediaries are solely focused on making a quick profit at the expense of clients such as yourself. At the very least, transacting with them would affect your credit history and in the worst-case, you may shell out thousand or lakhs of rupees without getting any loan processed.
Typical fees that you should NOT pay: Rs 5,000-50,000 to 5-10% of loan amount, expected in cash and often upfront

Professional fees by agent or broker

When pursuing a secured loan, such as a home loan or loan against property, additional intermediaries like accountants, brokers, and selling agents might enter the picture. These well-meaning professionals often share your details with various lending institutions, subjecting you to potential marketing approaches from sales teams. At minimum, you could expect to be spammed in the following days by the sales teams which may or may not the intention to get you the best possible deal but will have the intention to close your sale as soon as possible. This also exposes your sensitive information such as PAN and Aadhaar to get leaked.
Typical fees that you should not pay: Rs 5,000-50,000 to 0.5-8% of loan amount

Free at Creditnama

We, at Creditnama, have one goal – to get you the best possible deal on your home loan or loan against property in the shortest possible turnaround time.

We do not charge you, the loan seeker, anything. We get paid from a lending institution when you choose your deal and get the loan disbursed into your account.

Thus, our incentives are aligned with yours, every step of the way.

Still have questions?

If you still have questions or doubts, you can tap into our secured lending expertise by signing up on our website: