A Closer Look at the Various Loan Against Property Fees and Charges

A Loan Against Property or LAP is also known as a property loan or a mortgage loan. It is a type of secured loan that can be availed by salaried and self-employed individuals against a residential or commercial property that they own. While the property acts as collateral, a suitable sum of money is extended as a loan after considering several crucial factors. This borrowed capital can be utilised for a wide range of personal and business purposes like funding medical emergencies, family vacations, weddings, higher education, purchasing or renovating office space, upgrading current facilities and so on.  

Like other kinds of credit, property loan borrowers are obligated to cover certain fees and expenses towards loan processing, property verification and other associated charges. These costs are relatively minimal and aid the loan process making it hassle-free for both the borrower and the lender.    

A Closer Look at the Various Loan Against Property Fees and Charges

Before applying for a property loan, aspiring borrowers need to plan for the entire loan by assessing the actual credit cost and monthly pay-outs till the end of the tenor. This can be easily achieved by using helpful online tools like a Loan Against Property EMI Calculator. However, they also need to be aware of all the additional charges pertaining to a mortgage loan; some of which may be fixed while some may vary depending on the loan amount. The usual list of these charges commonly includes: 

Loan Against Property Processing Fee

All lenders impose a fee for processing loan applications. This one-time charge is levied when individuals submit their application forms. The processing fee for a Loan Against Property normally ranges from 0.5%* to 2%* of your loan principal, plus the GST. 

Legal Charges

Lenders evaluate all the documents required for a Loan Against Property before granting approval. This is done to appraise the credit risk of an applicant’s profile through legal paperwork and property verification, better known as legal fees, which may cost between Rs. 5,000* and Rs. 10,000*. 

CIBIL Report Charges 

Credit bureaus levy a nominal fee, termed as CIBIL report charges when lending institutions pull up credit reports to review property loan applications. 

People Also Read: What is the Minimum CIBIL Score Required for a Loan Against Property? 

Secure Fees

Secure fees are imposed by lenders to enhance the security of your account, information, data or transactions. These charges may not be applicable if you opt for online loan administration offered by most lenders these days. 

Statement Fees

Lenders issue mortgage loan statements, sometimes with separate interest and principal statements to assist in loan monitoring, against a modest payment referred to as statement fees. 

Loan Rescheduling Fees 

When servicing a mortgage loan, borrowers may request lenders for an extension of their loan tenors, otherwise known as loan rescheduling. Doing so effects a major change in the payable EMIs allowing you to pay lower instalments each month. Applying for a LAP rescheduling attracts a nominal fee.  

EMI Bounce Charges

If you pay your loan EMIs by cheque and it so happens that a cheque is not honoured due to insufficient funds in your account, issues with auto-debit instructions or post-dated cheques; you will be fined a specific sum as EMI bounce charges.  

Penal Interest Charges

When one fails to make timely repayments on their loans within the grace period, lenders exact a penalty. Generally, this fee comes to 2%* per month or 24%* annually on the outstanding amount due, although it may differ with every lender.  

Remember, among all the charges specified here, EMI bounce charges and penal interest charges can be avoided if you plan your EMI outgo well in advance so as not to miss any payment. Nonetheless, there are some additional Loan Against Property charges like part prepayment charges and foreclosure charges that should be factored in if you wish to close the loan earlier before the end of your tenor.  

People Also Read: Easy Ways to Pick the Right Loan Against Property Tenor 

Part Prepayment Charges

A part prepayment fee is imposed by lenders if you decide to pay off a small portion of your outstanding loan. This typically applies to borrowers who obtain a LAP at a fixed interest rate. As per RBI directives, those with a floating interest rate loan are not levied this charge.  

Foreclosure Charges

Similar to a prepayment, foreclosing your loan also incurs a fee wherein one repays their loan balance with a single payment rather than multiple EMIs. In such cases, ensure that your loan has a modest foreclosure charge to ease the pay-outs. 

Apart from the charges mentioned above, lenders may also levy other fares for non-compliance and for issuing duplicate NOCs. The list provided here is not a comprehensive one and the charges may vary among lenders. Hence, it is advisable to discuss and confirm the applicable charges beforehand to eliminate any confusion at a later stage. 

To Sum Up 

Understanding the various Loan Against Property charges and fees is as important as being aware of loan specifics like eligibility criteria, documentation requirements and other relevant information. While computing the finances involved in availing a property loan, one needs to account for all these extra costs as they might lead to a substantial increase in the overall price of your loan.  

*Terms and conditions apply.