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Types of Housing Loan Charges
Different Types of Home Loan Charges
There is no profiting from housing loans without dealing with home loan charges. Undoubtedly,
a home loan
has become an
essential type of loan because of its ability to make many people’s dreams of owning their
own houses, come to fruition.
So, it is only standard that something of such value comes at a small price. As far as
housing loans are concerned, the
home loan charges are the add-ons that accompany them. Of course, there are different
types of housing loan charges and
its necessary that all borrowers must know.
We have compiled a detailed list of the different types of home loan charges you’ll have
to pay if you want to take a
home loan in India. Read on to know more.
Planning to take a home loan? Here are the different types of home loan charges you’ll
have to pay.
Taking any loan involves a process. For your housing loan, documentation, registration,
and the process of applying can
be quite tedious. So, the norm is that you get charged for this.
To process your loan application, the financial institution charges a small fee. The
processing fee is between 2% to 6 %
of the loan amount.
Although the administrative charges serve an entirely different purpose from the
processing fee, it is one of the
non-refundable home loan charges that you must pay. The purpose of the administrative
fee is to help in the evaluation
of properties that the borrowers have presented.
This type of housing loan charge is placed on the legal and technical verification of
the property and data that the
borrower gives in exchange for the loan. The costs are always based on the loan amount
and the property provided.
Interest money is an essential part of repaying any loan. However, as far as home loans
are concerned, the home loan
interest rate can fall at any time. So, borrowers may feel the need to change
their interest rates. To do this, you need
to pay a conversion fee.
Most times, the conversion fee you pay after the decline of an interest rate depends on
the gap between the old interest
rate and the new interest rate. When paying your conversion fee, you may also be
altering the tenor of your loan.
Usually, the conversion fee helps to reduce the tenor.
It is always best to pay the conversion fee when the interest rate reduces, even though
there are other ways to handle
the decrease in the interest rate.
It should not be a surprise that something as serious as the late payment attracts a
home loan charge. If there is a
delay in your equated monthly instalment, you will be charged, and lenders will ensure
that this is done as and when
You may pay about 2% of the overdue EMI amount as a late payment charge when you are
guilty. This is an avoidable extra
charge. So, if you do not want to pay it, you always need to meet the payment deadline.
Here is another home loan charge that you need to learn about before taking any loan. In
India, the prepayment charge
taken with a floating interest rate is no longer valid. It is a different thing when you
are using a fixed home loan
interest rate. In other words, you must pay a prepayment charge if you are operating
with a fixed interest rate.
Before taking a home loan, you must understand certain critical terms. Two such terms are “fixed rate” and “floating
rate”. So, what is a fixed rate? What is a floating rate? Here, below, is a concise explanation.
This is a type of home loan interest rate that does not switch at all through the tenor of payment. It is constant until
you are done paying for the loan.
The floating home loan interest rate is the opposite of the fixed interest rate as it changes with the bank’s lending
rates or an external benchmark. So, if there is a lending rate revision in the bank, there will be a change in the
interest rate of your loan, whether ongoing or not. Therefore, a prepayment charge in India is applicable only if you
use a fixed interest rate.
Taking a home loan is a great way to speed up your dream of owning a home. If done correctly and with proper
organization, a home loan can change your life for the best. And of course, one of the best ways to do it properly is to
get familiar with all the home loan charges you are likely going to deal with. Knowing the reason for these charges
affords you the grace to pay them without feeling cheated.
Ready to take a home loan that will transform your life for the better? Apply for a Bajaj Housing Finance Home Loan now.
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