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Home Loan Charges
Availing of a Home Loan helps you reap several benefits. However, there are certain charges associated with a Home Loan that you should get acquainted with to avoid expensive surprises. You should proceed with your chosen Home Loan lender bearing in mind the additional charges and your requirements.
Below is a compilation of the different types of Home Loan charges you will have to pay during and after availing of a Home Loan.
Different Types of Home Loan Charges
If you are planning to avail of a Home Loan, following are the associated charges you may be required to pay.
Loan Processing Fee
The processing fee is an important and a one-time charge levied by your lender at the time of approving your Home Loan. It is a small percentage of your loan amount, which varies from lender to lender. Most lenders charge a processing fee starting from 0.35%, going up to 7%.
The purpose of administrative fees is to help evaluate the properties that the borrowers wish to purchase using the Home Loan sanctions. It is a non-refundable charge collected once to assist in the legal and technical verification of the property. The cost is based on the loan amount and the property to be assessed.
Borrowers may have to pay conversion fees when they transfer their existing Home Loan to another interest rate within the same bank. This typically occurs when existing borrowers want to move to a lower interest rate on their Home Loans.
Late Payment Charges
If there is a delay in your EMI payment, your lender is liable to charge you a late payment fee. You may have to pay about 2% of the overdue EMI amount as a penalty.
While individual borrowers with floating interest rate Home Loans are safe from part-prepayment and foreclosure charges, entities or borrowers with a fixed interest rate Home Loan will have to bear additional charges upon prepayments or foreclosure.
Read More:Everything About Home Loan Refinancing
What is the Difference between Fixed Rate and Floating Interest Rate?
An interest rate is a charge levied by the lender on the Home Loan principal amount, as a cost of borrowing. Traditionally, two types of interest rates are offered on Home Loans, namely, fixed rate and floating rate. To learn more about these two interest rates, read on.
Fixed Interest Rate
As the name suggests, this type of Home Loan interest rate does not change through the repayment tenor. A fixed interest rate is agreed upon between the lender and the borrower before the loan sanctioning. Borrowers can opt for a fixed interest rate to avoid the risks associated with floating interest rates, wherein the rate fluctuates basis the benchmark rate.
Floating Interest Rate
Floating interest rate Home Loans offer more fluidity in terms of the interest component on the Home Loan. The interest rate is pegged on several factors, including either an internal or an external benchmark, which allows it to move higher or lower, depending on market factors.