{"id":68,"date":"2020-02-12T09:40:22","date_gmt":"2020-02-12T09:40:22","guid":{"rendered":"https:\/\/www.loanfasttrack.com\/blog\/?p=68"},"modified":"2020-03-27T16:42:53","modified_gmt":"2020-03-27T16:42:53","slug":"must-know-all-costs-in-home-loan","status":"publish","type":"post","link":"https:\/\/www.loanfasttrack.com\/blog\/blog\/finance\/must-know-all-costs-in-home-loan\/","title":{"rendered":"DON\u2019T GET FOOLED !! MUST KNOW ALL COSTS IN HOME LOAN"},"content":{"rendered":"\n
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COSTS Associated with Home Loan. <\/strong><\/h2>\n\n\n\n

Introduction:-<\/strong> Buying a home is the dream of all and is the necessity which is also defined as the basic requirement of the human being along with food and clothing. Therefore to buy this shelter people spend their life savings and many choose to go for borrowed funds with convenient repayment tenure. Owing a home becomes affordable for him with the help of home loan from lender Banks\/NBDC\u2019s. <\/p>\n\n\n\n

The famous\nquote says, \u201cNothing Comes Free Of Cost\u201d, & so taking a home loan also\ninvolves various kinds of costs. In general all are aware of mainly only 2\ncosts which are processing fees and stamp duty i.e. the registration cost on\nloan amount. Unawareness if the other associated costs involved for availing\nhome loan, is the base reason for the formation of this blog. We will try to\ncover all the associated different types of costs in home loan for you. <\/p>\n\n\n\n

For better understanding we will classify the costs into two broad heads:<\/strong><\/p>\n\n\n\n

A) <\/strong>Cost incurred during the process of Home Loan- Sanction & Disbursement.<\/p>\n\n\n\n

B) <\/strong>Costs incurred post loan disbursement i.e. after the completion of the home loan process.<\/p>\n\n\n\n

Kinds Of Costs:<\/strong><\/h2>\n\n\n\n

A) Cost incurred during the process of Home Loan <\/strong><\/p>\n\n\n\n

1) Processing Fees (PF): <\/strong>As the word itself suggests, it is the charge taken for processing of your loan. All Banks & NBFC\u2019s charges the PF to their customers for providing the funds i.e. the loan. The PF charges differ from banks to banks and banks product to product. Broadly the standard charges for PF are 0.25% -1 % of the loan amount. The PF cost also differs from loan to loan and in many cases on the quantum of the loan applied or as it may be prescribed by the lender bank\/NBFC.<\/p>\n\n\n\n

In fact there\nare various factors such as eligibility criteria, customer profile call, risk\ninvolved, property concerns, etc. which determines the PF charges for the\nbanks\/NBFCs depending on case to case. As a result there is a chance where bank\ncan charge you with higher PF especially in the scenario of special approval\ncases which can be as high as up-to 2% of the loan amount.<\/p>\n\n\n\n

2) GST on PF: <\/strong>Before the implementation of GST act, service tax of 15% was charged on PF. But post GST, service tax of 15% was replaced by 18% GST on PF amount.<\/p>\n\n\n\n

It is important\nto understand that, GST is applicable not only on the PF amount but also on any\nother charges charged by the banks such as administration charge, legal charge,\ncersai cost, cost on pre- payment and part payment, etc. <\/p>\n\n\n\n

3) CERSAI: <\/strong>Central Registry of Securitisation Asset Reconstruction And Security Interest. i.e. CERSAI charge is mandatory for tall home loan takers. It is India\u2019s central online security interest registry of equitable mortgages. It was mainly created to check fraudulent activities in lending against equitable mortgages, in which multiple loans are drawn on the same property from different banks by the people. Cersai charges are fixed @ Rs. 100\/- for all the home loans above 5 lakhs.<\/p>\n\n\n\n

4) CIBIL Charges: <\/strong>Credit Information Bureau (India) Ltd. i.e. CIBIL maintains the credit history of the individuals credits and loans and provides the credit report of the same. Credit reports are made available to an individual at a cost of Rs. 550 by CIBIL. However when you apply for a home loan with banks\/NBFCs, the banks themselves generates your cibil report from CIBIL and charges you with a nominal cost for generating which are usually much lower than the individual rate of Rs.550. <\/p>\n\n\n\n

Rs. 100 is the\nCIBIL cost. (With ref to the charges levied by ICICI)<\/p>\n\n\n\n

5)<\/strong> i) Administrative Charges: <\/strong>Administrative charges are a one-time non refundable chares collected by the banks in order to recover the administrative cost of processing the application. Such cost differs from bank to banks\/NBFC and are usually payable at the time of disbursement i.e. after the loan is sanctioned.<\/p>\n\n\n\n

Ii) Technical Charge: <\/strong>Banks have tie ups with the agencies which performs technical valuation of the property. As the banking process bank carries out the physical inspection of the loan applicant\u2019s property through these agencies in order to ascertain they do not over lend of the cost of the property. And such cost of valuating is also charged to the applicant.<\/p>\n\n\n\n

iii) Legal Charges: <\/strong>Banks usually do not have their in-house lawyers for scrutinizing the borrower\u2019s legal\/property documents such as property agreement or chain of agreements, title, etc, for which they hire external lawyers. The cost paid to the lawyer is the legal charge which is charges to the loan applicant. While such cost differs from banks\/NBFCs lawyers to lawyers, the charges may range from Rs.3000- Rs.10,000.<\/p>\n\n\n\n

Different banks\nhave different ways of charging these costs. Some may charge them separately\nwhile few may prefer to charge them under 1 head of administrative cost (like\nICICI\u2019s administrative charges of Rs.5900 cover the valuation and legal\nverification of the property), while many also club the legal and technical\ncost as a single cost.<\/p>\n\n\n\n

6) Title Search Cost: <\/strong>The title search of the property is done to ensure the property has clear marketable title. The banks insists on title search in order to find out the history of the property to be assured, if it is free from any encumbrances such as any lien or mortgages on the property. Banks like ICICI prefer to do title search mandatory only in the cases of resale home loan above 1cr and in the builder case\/under-construction projects, title search is requested only if the concerned project do not have an APF no. Few banks & NBFCs has made the title search as a mandate tool for all resale cases irrespective of their loan ticket sizes and in all loan files with non-APF projects. These title search reports has to be generated from the banks tie-up lawyers only. The cost of title search differs with each bank and does broadly range from Rs.3500-Rs.7000 per property. <\/p>\n\n\n\n

7) Intimation To Mortgage: <\/strong>An mandatory cost of Rs.1300 towards notice of intimation is applicable to all home loan takers. The bank provides the prescribed format of intimation.  It is mandatory to intimate the sub-registrar office within 30 days of the loan taken; failure to which the state government can impose a penalty of 1% on the loan amount. This is the newly introduced process and is currently practised only in the state of Maharashtra.<\/p>\n\n\n\n

8) Registered Mortgage(RM): <\/strong>In simple terms an RM is associated with home loan very often with the resale transactions(also with mortgage loan), where the buyer is purchasing a resale property and there are instances where the original title deed is not available, reason- it may have been stolen or lost, or where the property is too old or in the case of ancestral property where there is no title deed, banks ask the loan applicant for doing registered mortgage. Therefore to define RM means a charge on the property created in order to transfer of the interest to the lender (bank) as a security for the loan. The charge is created with the sub-registrar through formal written process. The charges for RM are 0.50% on the loan amount. Note here, when an RM is done there is no need to pay 0.20% of stamp duty charges, rather in other words, simply the stamp duty cost of 0.20% gets replaced by the RM cost of 0.50%. Below is the bifurcation on the RM cost paid to the government.<\/p>\n\n\n\n

i) Stamp Duty\ncost \u2013 0.50% on the loan amount.<\/p>\n\n\n\n

ii) Registration cost – <\/p>\n\n\n\n

For loan amount up-to 30lakhs \u2013 registration fees of 1% on loan amount.<\/p>\n\n\n\n

For loan above 30lakhs \u2013 registration fees of flat Rs. 30,000\/-.<\/p>\n\n\n\n

RM is\nconsidered to be the most expensive mode. The above are not the only charges\nassociated with it but a borrower also has to pay a service charge to the\nservice provider (lawyer who helps to do RM) which may vary between\nRs.10,000-Rs.15,000\/- thousand.<\/p>\n\n\n\n

9) Disbursement Charges: –<\/strong><\/p>\n\n\n\n

i) Franking<\/strong>: Franking is done only after\nthe borrower pays the stamp duty (tax paid to state government to buy a\nproperty). It is the process of stamping as a confirmation of said stamp duty\npaid. The franking charge varies according to states and is between 0.10% –\n0.20% of the home loan amount. However stamp duty and franking are different\nterms but they are often used interchangeably when it comes to home loan. But\nknow that you know it, there remains no room for your confusion.<\/p>\n\n\n\n

ii) Resale Affidavit<\/strong>:  As the term itself suggests, it is the charge\ninvolved only in the resale home purchase. A borrower applying for home loan\nfor purchasing a resale property has to pay a charge of Rs.800-Rs. 1000 as\nresale affidavit charges. It is the bank agreement which is franked and notarized\nfor the said amount. <\/p>\n\n\n\n

 iii) MOD\n(Memorandum Of Deposit Of Title Deed)<\/strong>: It is the charge associated with the\nmortgage of the property. It is an assurance to the loan borrower for the non\nfraudulent sale of the mortgage property and also preventing from multiple\nmortgaging. Generally the percentage of the home loan amount is collected as\nthe MOD fees and it may vary between 0.10% – 0.50% depending upon banks. <\/p>\n\n\n\n

iv)Other Charge<\/strong>: There might be\ninvolvement of any other charges if any during the loan disbursement. Such\ncharges may not be common among banks, but are equally inevitable. One such\ncharge is the Facility Franking<\/strong>\ncharge. It is the bank\u2019s (ICICI) facility format on which franking is done for\nRs.600\/-.<\/p>\n\n\n\n

10) POA- Power Of Attorney Cost (Only For NRI): <\/strong> An NRI engaged with property transaction where he is not physically present in India, issues a power of attorney to his trusted individual (family or even friends) who acts as representative in the absence of the NRI. The POA holder through POA gets a right to make proxy signatures on all legal formalities in the absence of the NRI. POA with reference to the home loan, costs around Rs1200\/- which includes the franking as well as the notarized cost. It is the bank\u2019s format of POA and is to be dually signed by both NRI and the person to whom the POA is to be given.<\/p>\n\n\n\n

11) Additional Cost – Public Notice: <\/strong>This is an unusual cost which is incurred due to unavailability of the certain original documents. In the event of loss of original document due to any reason (misplaced, stolen or lost during natural calamities) a borrower is required to give a public notice regarding the same through newspaper advertisement. For which he has to first approach the police station for filling the FIR of the lost documents followed by getting a NOC from police. It is with this NOC he has to approach the concerned lawyer who will guide him for the public notice. Such public notice is an advertisement on the newspaper which is done in both English & state\u2019s regional language newspaper, which may cost around Rs.5000\/- per newspaper ad.  The borrower also needs to pay a service charge to the lawyer which may cost him around Rs.3000-Rs.5000.<\/p>\n\n\n\n

B) Costs incurred post loan disbursement<\/strong><\/p>\n\n\n\n

This includes\nthe cost incurred during the loan tenure. There are numerous other charges\nlevied by the lender bank\/NBFCs after the loan is taken. Such costs are like –\nservice charges, documentation charges, loan switching charges, closure\ncharges, etc. Some specific conditional costs can also be seen specified on the\nloan sanction letter copy. Let us see in detail all such variants of cost\nrevolving around the loan after its disbursement. Such costs are different for\ndifferent banks\/NBFCs.<\/p>\n\n\n\n

1) LOD (List Of Documents): <\/strong>LOD means the list of all original documents that are submitted to the bank for taking the loan. The LOD has to be on the lender bank\u2019s\/NBFC\u2019s letterhead. It is provided by the banks. The customer has to raise a request to his disbursement bank for a copy of LOD for which he might be required to pay a nominal cost. Usually this facility is free of cost for many banks, but there are prevailing few NBFC\u2019s who still prefer to charge for the LOD.<\/p>\n\n\n\n

2) Documentation Retrieval Charges:<\/strong> You are required to keep the sufficient photocopies of the originals (sale deeds, sale agreements\/chain of agreements, original NOC, share certificate) before submitting to the banks. If you lack to save photocopies, the retrieval of the same from the bank may cost your pocket. Charges may differ from banks. You need to pay the amounting cost along with the applicable taxes on it. ICICI charges Rs.500\/- for such retrievals. <\/p>\n\n\n\n

3) Statement Of Account Charges: <\/strong>The annual statement is made available for the customers for free by most of the banks. But in the event where the latest statement is required or where the existing statement is misplaced \/lost, generating a new statement from the banks will cost you up-to Rs. 500 per statement. Again cost differs from bank to bank.<\/p>\n\n\n\n

4) Loan Cancellation Charges: <\/strong>There are yet few banks who believe in charging for the cancellation of the loan. A loan can be cancelled only before its disbursement. A disbursed loan cannot be cancelled it is pre-closed\/foreclosed. The cancellation charges may vary from banks to bank and are in a range of Rs.5000-Rs.10000 plus GST on it. It is important to note that the processing fee on loan cancellation is usually non-refundable.<\/p>\n\n\n\n

5) Loan Switch Charges: <\/strong>With the fluctuations in the interest rates a customer can choose to shift his loan from an expensive interest rate to a bank offering lower rate of interest. As per the updated RBI\u2019s guideline such loan transfers are not chargeable. Prior to the RBI\u2019s changed guidelines banks\/NBFCs used to charge a fee of 2% – 4% of the unpaid principle amount as the foreclosure charges. Unlike fluctuating rate of interest, an individual having a loan with fixed rate of interest cannot switch the loan free, and is bound to pay the levied pre-closure charges which may range from 1% – 4% OR in the event of special approval cases a special conditions on loan switch may be levied by the banks.<\/p>\n\n\n\n

6) Interest Rate Conversion Cost: <\/strong>At times a change in the RBI\u2019s repo rate may gradually increase the existing interest rates of the customers. The increased interest rates thereby increase the EMI of the customers. Under such circumstances a customer can sought to approach his existing bank for reducing his existing high interest rates to the prevailing interest rates in the market. A cost paid for getting reduced interest rates is called as the conversion cost. This option is more suitable in comparison to loan switch as loan switch is time (processing time of 15-20 working days) and money (processing fees+ other relevant associated costs) consuming.<\/p>\n\n\n\n

7) Pre & Part Payment Charges: <\/strong>As per RBI\u2019s Guidelines there is no pre & part payment charges for the loan. But as discussed earlier a fixed rate loan borrower is liable for the pre & part payment charges as may be specified by his lender bank\/NBFC. Also in case of special approval cases (pertaining to Eligibility, property call, tenure calls etc.) banks may choose to charge with part payment and foreclosure charges which may vary depending upon case to case and bank to bank.<\/p>\n\n\n\n

8) Penalty Charge on EMI Bounce: <\/strong>Any delayed payment in the EMI irrespective of its reasons attracts penalty on the EMI amount. The penalty may vary from 1% – 2% of the monthly instalments depending upon the banks\/ NBFCs. Such delayed payments on loan EMIs directly affect CIBIL of the loan borrowers and making it equally difficult for loan transfers due to low CIBIL score.<\/p>\n\n\n\n

To summarize: <\/strong>As promised\nin the beginning we have tried to cover for you all the costs associated with home\nloan, in a way that is simple & easy to understand. The borrower is assumed\nto be an individual (salaried \/ self-employed), accordingly the costs are\ndescribed. The costs mentioned above are inevitable but definitely varies from\nbanks\/NBFCs. We have purposely not included home insurance<\/a> as a cost\nabove. Though for borrower the increase in EMI due to the offered insurance\ncover seems to be an additional cost incurred, yet it is a benefited financial product\nfor a borrower. At times banks also insist on mandatory account opening as a\ndisbursement condition, thereby imposing a cost for maintaining a minimum\nmonthly balance for the borrower. Apart from home insurance & account\nopening the borrower may also sometimes require keeping fixed deposits with the\nbank, which is also an additional cost to bear because it blocks his money until\nthe loan tenure or for the period specified by the bank. Such costs are\nconditional cost that may not be mandatory with all home loans unless for few\nand may differ from bank to banks.<\/p>\n\n\n\n

NOTE:<\/strong>{(1) References are taken form ICICI home loan, HDFC home loan and NBFC\u2019s-like Piramal Housing finance, (2) Costs broadly described in view with Mumbai city and its Suburbs in the state of Maharashtra. (3) Banks \/ NBFCs may modify \/ alter the charges from time to time. Hence, there might be slight difference in the updated cost specified in the blog.}<\/p>\n","protected":false},"excerpt":{"rendered":"

COSTS Associated with Home Loan. Introduction:- Buying a home is the dream of all and is the necessity which is also defined as the basic requirement of the human being along with food and clothing. Therefore to buy this shelter people spend their life savings and many choose to go for borrowed funds with convenient …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[33],"tags":[14,16,15,11,9,12,17],"class_list":["post-68","post","type-post","status-publish","format-standard","hentry","category-finance","tag-best-bank-for-home-loan","tag-best-home-loan","tag-home-loan-costs","tag-home-loan-in-mumbai","tag-home-loan-transfer","tag-housing-loan-in-mumbai","tag-instant-home-loan"],"_links":{"self":[{"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/posts\/68","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/comments?post=68"}],"version-history":[{"count":3,"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/posts\/68\/revisions"}],"predecessor-version":[{"id":115,"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/posts\/68\/revisions\/115"}],"wp:attachment":[{"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/media?parent=68"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/categories?post=68"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.loanfasttrack.com\/blog\/wp-json\/wp\/v2\/tags?post=68"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}