The number of home loans in India grew by 13%* in the financial year 2019-20. The Government initiated various schemes that have ensured that availing such credits is affordable, thereby ensuring this steady growth. Also, the easy availability of these loans from various financial institutions has made it easier for individuals to buy their dream home.
There are a few associated charges with housing loans that can affect the total cost of a loan considerably even though they are easy to avail. Borrowers can generate maximum savings if they can avail a home loan with minimum such charges.
However, there are various charges associated with such credits that a borrower should know so they can avail an ideal housing loan according to their needs. Here is a list of home loan charges that a borrower should know.
- Interest rate
It is the additional cost that a lender charges to sanction a home loan. It varies from lender to lender, so individuals are required to conduct proper research before availing such credits. Advances with nominal home loan interest rates significantly reduce the debt obligations on a borrower.
- Processing fees
It is the fee charged by financial institutions to process the home loan application. It includes various costs, including administrative expenses like reviewing a loan application and verifying the financial documents and the property. It also covers the charges of sending the related loan documents to a borrower.
- EMI bounce charges
It is a penalty fee that borrowers have to pay if a cheque to pay their EMIs bounces. It can happen if borrowers do not have sufficient funds in their account. They are required to pay a one-time fee for that.
- Penal interest
Penal interest is the fee charged by various lenders for default of an EMI payment. Borrowers can avoid such charges by repaying their debt on time. Furthermore, they should ensure that they avail credits with an EMI amount suitable according to their repayment capability. It will reduce the chances of defaulting. They can use an online house EMI calculator to determine the amount of monthly debt obligation beforehand.
- Prepayment charges
It is the penalty fee charged by a lender when a borrower opts to pre-pay a part of their existing home loan principal amount. Borrowers should ensure that they avail such credits from a lender that charges minimal prepayment charges to make the most of their advances.
Several lenders also offer floating rate Home Loans with zero prepayment charges. Some of the other benefits they provide include –
- High loan amount
- Flexible tenor
- Affordable interest rates
- Online loan account management
They also provide pre-approved home loan offers to simplify the process to avail them for a borrower and reduce the time required. These pre-approved offers cover a plethora of financial products and services, including business loans, personal loans, e-home loans and more. To check your pre-approved offer, you are required to submit a few essential details like your name and phone number.
- Foreclosure charges
A foreclosure fee is an amount a penalty amount that a borrower has to pay to repay their debt before time. Home loans with floating interest rates do not require foreclosure charges. Borrowers should avail their home loans from a lender that charges minimum foreclosure fees.
- Secure fee
Various financial institutions offer online services for their borrowers. A secure fee is a charge to maintain the smooth running of their online services. Lenders use this amount to maintain online gateways, payment systems and online security.
- MODT charges
Memorandum of Deposit of Title Deed or MODT charges is the fee that borrowers have to avail a home loan. It is an essential undertaking given by them that they are submitting the property documents to a lender at their own free will to avail credit.
- Loan conversion charges
It is the fee charged by financial institutions when borrowers decide to change their interest rates from floating to fixed or vice versa. These are essential home loan fees and charges that you must know. Compare these charges carefully before you opt for a home loan online application procedure to make the most of your credit.