5 Lesser Known Home Loan Charges to Remember

You might have seen quite a few advertisements recently that show that home loans are now available for interest rates as low as 8.5% per annum. These rates are indeed among the lowest in history and it is definitely a good time to invest in a property of your choice. However, before you get inspired and jump on the band wagon you do need to keep in mind that interest charges are only part of the cost of taking a home loan. The following are some additional charges associated with a home loan

1. Processing Fee

This fee is usually charged as a percentage of the final loan amount disbursed to the applicant. Usually ranging from 0.5% to 2.5% of the loan principal, this can be a significant cost in addition to the interest payments. Consider this, if you get approved for a home loan of Rs. 75 lakhs, your processing fees can range from Rs. 37,500 to Rs. 187,500. The good part is that this is a one-time payment that is included in your home loan EMI. Hence, most borrowers hardly notice the processing fees. Another factor to keep in mind is that this fee is in most cases non-refundable i.e. even if your application for the home loan gets rejected, you will have to pay the applicable processing fees

2. Prepayment/Foreclosure Charge

Prepayment refers to paying an amount greater than the home loan EMI that is due. In case of part-prepayment, only a portion of the extra amount in paid i.e. a portion of the home loan remains unpaid though the amount paid is greater than the EMI due. In case of foreclosure, the home loan is completely paid off before the tenure has been completed. At present, the Reserve Bank of India has mandated that banks cannot charge for prepayment or foreclosure of a floating rate loan, however, these charges are applicable in case of a fixed interest rate home loan

3. Administrative Charge

When you apply for a home loan, the bank does its due diligence with respect to the property you intend to purchase. Such due diligence includes but in not limited to valuation, documents check and legal check. This is a one-time fee applicable to the initial period of the loan application process and can be charged as either a flat fee or a percentage of the loan amount that is sanctioned. This fee is also not refundable irrespective of whether you get approved for the loan or not

Also check your home loan eligibility in details

4. Swap Charges

At the time of finalising your loan disbursement, you have to submit either post dated cheques (PDCs) or an ECS mandate for loan repayment. These PDCs or ECS instructions are account specific and in case you decide to change banks or get the specific account for loan repayment closed, you will have to submit new PDCs or ECS instructions. In such cases, the bank levies the swap charges. This is a per-instance flat rate charge i.e. every time you resubmit your PDCs or ECS mandate, these swap charges will be levied

5. Late Payment Charges

In case you fail to make you regular EMI payments within the due date, the lender levies a late payment charge on the overdue amount. This late payment charge usually ranges from 2% to 4% on the overdue amount and is charged every time you miss the EMI due date. Though this penalty amount might seem insignificant considering the home loan quantum, delayed payments get reported to credit bureaus and show-up on your credit report. These late payment reports can adversely affect your credit score and make it harder to apply for loans or credit cards in the future.

Table showing comparison of home loan charges levied by leading banks:

Charges Levied	HDFC Bank	Axis Bank	State Bank of India
Processing Fee	Higher among Rs.300 or 1.25% of home loan disbursed	Min. Rs. 10,000 and up to 1% of loan amount sanctioned	0.35% of loan sanctioned. Min. Rs. 2000, Max. Rs.10000.
Pre-payment/Foreclosure Charges	Nil for floating rate loan/Up to 2% of amount prepaid/foreclosed	Nil for floating rate loan/2% of outstanding principal amount	Nil for floating rate loans/Up to 2% of outstanding principal amount
Administrative Charges	Depends on individual customer profile	As per actual	As per actual
Swap Charges	Rs. 200 each instance	Rs.500 each time	Rs. 200 per instance
Late Payment Charges	Up to additional 24% per annum charged on overdue amount.	Up to 2% per month on overdue amount above the applicable rate.	2% extra per month above the applicable interest rate on the overdue amount.