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6 home loan charges you should be aware of

In the past few years, real estate has been one of the most lucrative investment options for people. The increase in demand of the real estate sector has led to a rise in the price of the properties. Both land, as well as properties, have become expensive. To appease the customers, banks and other financial institutions have home loans in place.

You can apply for home loan to buy a residential property or bungalow. You have to repay the loan amount to the lender in the form of equated monthly instalments (EMIs) which is inclusive of the interest rate and principal amount.

However, before you acquire a home loan, you should be aware that there are additional charges that could surge your total amount, despite lower interest rates.

Following charges that lenders levy on home loans are:

1) Application costs: Lenders charge application processing fees, irrespective of the fact that your application was approved or rejected. Such costs are non-refundable and add up to 1 per cent of the loan amount.

2) Processing fees: These are document verification charges. The document checking process involves many people and legal expenses. This processing fee varies from lender to lender.

3) Legal charges: Some lenders appoint external lawyers to verify the documents. The lenders pass on the lawyers’ charges to you. However, if the lender approves of your loan, there is no scope of legal fees.

4) Conversion fees: If you want to reduce the interest rates, you have to pay the conversion costs. So, if the lender charged an interest rate of 11 per cent when you availed of a home loan and the charges have dropped to 10 per cent now, you will have to pay a conversion fee for the same.

5) Memorandum of deposit: When you apply for home loan, you have to sign an agreement stating you have submitted all documents concerning your property to the lender. The Government levies stamp duty on it. This duty price varies depending on the state you are purchasing the property.

6) Document retrieval fees: You have to submit all the property sales deed and sale agreement with the lender when acquiring a home loan. The lenders keep these papers secure in a central safe repository, managed by a third-party. So, when you close or pre-close your mortgage, the lenders charge you some retrieval fees. They are usually part of the processing costs.

If you apply for home loan, it is imperative to learn about these charges. In fact, you should ask the lenders about additional fees beforehand.