Home Loans are the fuel that will drive our dream of owning a house and enjoying personal time with our loved ones. Everyone on this planet wished for three basic things – a loving family, a great job or a business, and a sweet home. But unfortunately, building a home these days will require huge sums of money, so relying on savings is not really feasible. Hence, before we finalize the plan of the building or purchase a house, we search for fintech institutions that offer the best Home Loan deals.
Typically, Home Loan providers have their own websites, which include an online free tool called Housing Loan Calculator, where you will get an estimation of the EMI you need to pay based on inputs like loan amount, annual interest rate, and payment term. It is an excellent feature offered by Home Loan providers as you can get a clear idea of their offers, which can be used to compare with other lenders. However, there is a catch, as these EMI calculators will not include Home Loan processing fees. This aspect of a Home Loan can’t be ignored as it will add to the existing cost of the Home Loan you are about to avail of from a service provider. Let’s provide you with a complete guide about Home Loan processing fees, other charges, and documentation requirements so that before you apply for a Home Loan, you get a clear picture of the total costs involved and the steps to be taken to ensure repayment doesn’t become an issue in the long run.
Home Loan Processing Fee
The Home Loan Processing fee is one of the most vital charges to get approval for a Housing Loan. It is a one-time payment levied by Home Loan providers for processing your application. The lenders will ask you to pay the Home Loan processing fees after the loan application is approved. It is also referred to as an “administrative fee”.
The Home Loan Processing fee is calculated as a small percentage of the final loan amount approved. This percentage is variable, so each lender levies according to their standards. India’s Home Loan processing fee is typically around 0.5%-1% of the approved loan amount plus GST.
As the Housing Loan Calculator doesn’t include this charge, you must look at the official website of the Home Loan lender to get the applicable Home Loan processing fees. If you are looking for a housing loan, here are the top 5 fintech institutions in India with the lowest Home Loan processing fees in 2022.
Home Loan Provider | Minimum Home Loan processing fees plus GST |
Kotak Mahindra Bank | 0.5% |
SBI Home Loan | 0.5% |
HDFC Home Loan | 0.5% |
Magma HFL Home Loan | 0.5% |
Cholamandalam HFL Home Loan | 1.0% |
Common charges levied by Lenders along with Home Loan processing fees
- Prepayment charge
This charge has to be paid to the lender if you decide to pay the outstanding Home Loan balance before the repayment term ends. A certain percentage of the loan amount is levied as prepayment charges. It typically ranges between 2% – 6%.
- Conversion charges
When you shift from a floating rate to a fixed-rate Home Loan or vice versa, you may have to pay a one-time fee for conversion.
- Late payment fee
This fee is charged when there is a delay in your Home Loan EMI repayment
- Legal fees
This type of fee is levied by Home Loan providers for legal validation of your property documents. This amount usually ranges from Rs 5,000-Rs 10,000 and varies from lender to lender.
- Balance Transfer charge
Home Loan lenders levy a balance transfer charge when you transfer your loan balance from their bank to another.
- Valuation charges
The lender levies this charge against expenses incurred during the property valuation. Based on the report submitted by the investigative team, lenders either approve or reject your Home Loan application.
Also Read: Why Should You Use EMI Calculator Before Applying For A Loan?
- MOD charge
The Memorandum of Deposit (MOD) is a necessary charge you must pay when applying for a home loan. This MOD confirms that you have pledged your property’s title deed as collateral to the lender. MOD charges vary across states and typically range from 0.1% – 0.5%.
Home Loan Documents
Documentation is critical when it comes to Home Loan approval. Here are the typical documents requested by the Home Loan provider for validation.
- Identity Proof
- Age Proof: Voter ID, PAN card, Aadhaar Card, Driving License, Passport, etc.
- Income Proof like salary slips, bank account statements, etc.,
- Residential Proof: Passport, Aadhaar Card, Voter ID, Driving License, etc.
- Banking details
- Proof of educational qualification
- Relationship Proof
Conclusion
Now that you have understood the importance of Home Loan processing fees and other charges, you will be better positioned to use the Housing Loan Calculator and arrive at a more accurate cost of availing a Housing Loan. However, the Home Loan processing fee is a small percentage but is still significant as it is calculated based on the loan amount approved. Hence, as the amount increases, Home Loan processing fees also increase. Hence, it’s best to be well-informed before you apply for a Home Loan and build your dream house.