A home loan plays a very important role while buying a property as it involves a person’s lifetime savings. While utmost care must be taken while applying for the right kind of home loan, borrowers must also evaluate several associated charges other than the interest rate that most of the individuals are not aware of.
Take a look at these lesser-known home loan charges:
Franking charges are commonly known as stamp duty charges which most of the banks levy during home loan processing. However, it is nothing but a compulsory tax on the transfer of rights in a property i.e. from builder to seller. These charges vary from state to state depending upon the state laws and type of property, location, etc. A franking fee is also charged on the Loan agreement. In India, only a few states charge such type of fee. For example, in Maharashtra and Karnataka, if you are taking a 1.50 crores loan, then the franking charge on loan agreement payable is Rs 30,000.
Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) is a central online security interest registry of India. The main motive of creating CERSAI is to check frauds when an individual takes multiple loans on the same asset from different banks.
Currently, the charges prescribed by CERSAI, for the creation or modifications of Security Interest in favour of secured creditors are:
- Rs 500 + Service Tax for loans above 5.00 Lacs
- Rs 250 + Service Tax for loans below 5 lacs
At the time of its implementation, banks made payment of the charges during home loan processing. But now they have started charging a nominal fee from the loan borrower. For example, Rs 50 for loan amount up to Rs 5 lakh, whereas for loans above Rs 5 lakh a fee of Rs 100 is charged.
Repayment Mode switching charges
Many times, a home loan borrower request banks to change their existing repayment mode. Some opt for Electronic Clearing Service (ECS) mode in which payment is done through electronic mode, while another one is postdated cheque (PDC) system. So, a loan borrower must be aware that if he/she wants to switch their repayment mode then, banks levy a fee. This fee usually goes up to Rs 500 per swap, varying from lender to lender.
EMI bounce charges
It’s important that an individual must maintain their bank account whether they are paying loan EMI through ECS mode or PDC mode. Failure to pay EMI on time attracts an extra fee which varies from banks to banks.
EMI outstanding fees
Delay in paying EMI also attracts a higher amount of overdue charges that add up in the interest rates. It sometimes goes as high as 24% per annum. Therefore, before taking a home loan, make sure you have enough financial backing in order to avoid high penalties for delayed payments.
Rate conversion charges
A home loan borrower often asks banks and financial institutions to switch or reduce their existing interest rates. It may be from base rate setting regime to MCLR system, from fixed to floating rates or from a higher floating rate to lower floating rate as per an individual need. You must be aware that these conversion rates are charged by banks in a particular amount fixed by them.
So, keep in mind these terms before applying for a home loan.