Watch out for these hidden costs when applying for a home loan

 

Did you know that whether your home loan is sanctioned or not, you must pay certain charges to the lending bank? Here are some of the lesser-known yet important facts you must know about them

Many homebuyers apply for a loan to finance their dream home.  However, in the eagerness to get the loan sanctioned, one tends to overlook the fine print.  Here’s a closer look at some pertinent information and expenses that buyers must become aware of.

Loan Processing fee

As soon as you apply for a loan with the required documents, the bank will have to execute a few tasks before sanctioning the amount.  These include verifying your documents and the authenticity of the residential project. You’ve chosen.  They charge a processing fee which is usually non-refundable.  This fee varies from lender to lender.  While some charges a fixed amount, others may charge a certain percentage of the loan amount.  What’s more, paying the processing fee is not a guarantee that the loan will be sanctioned.  So, if your loan application is rejected, the processing fee will not be refunded.

Legal and technical property assessment fee

When you apply for the loan by furnishing all documents including copies of the sale deed and sale agreement of the property and have paid the processing fee, the bank gets their legal and technical teams on the job to verify the documents and assess the property.  These could be employed by the bank or the services could be outsourced to a third party.
The legal team is tasked with assessing whether the property you are buying with the loan is free from encumbrance and if there are any legal disputes on the property ownership.  The technical team reviews the property to gauge its worth and decide whether the loan application is indeed for the property mentioned.

Loan administration fee

Once the bank has completed the legal and technical verification, becomes convinced that you deserve the loan, and sanctions your loan, you will have to pay the administration fee.  This amount, too, depends on each lending institution.  While it's a fixed fee in some places, a few others might charge a higher amount if you are aiming for a high-end home.  Others might waive off the administration fee if you request them since you’re on a good wicket with the loan sanction.

 

Loan documentation fee

Although most documentation of your home loan is done online today and you may not need to visit the bank to physically sign the documents, banks still charge a fee to keep them in safe custody.  If you are repaying the EMIs from your bank account through the electronic clearing system (ECS) , your lending bank will charge a fee to activate the ECS.  Moreover, during your homeloan application, you are required to submit the original property documents to the bank after the documents are registered with the local sub registrar.  The bank transports these documents to their assigned, usually centralised, branch to keep them secure in their custody.  Professional third-party security and logistics services are hired to do this job for which they are paid.  This is then charged to you, the borrower.

GST charges on home loan

The bank’s services rendered to you at the time of processing the home loan come under the Goods and Services Tax (GST) bracket.  While the loan amount sanctioned is not liable for GST, you will have to pay the charge on other services such as the processing fee, administration fee, legal and technical assessment charges, documentation fee, etc.
Paying attention to these small details and expenses can save you a world of trouble as you navigate property buying.