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Types of Housing Loan Charges

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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.

Different Types of Home Loan Charges

Planning to take a home loan? Here are the different types of home loan charges you’ll have to pay.

Loan processing fee

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.

Administrative charges

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.

Conversion fee

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.

Late payment charges

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 due.

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.

Prepayment charges

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.

What is the difference between a Fixed Rate and a Floating 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.

Fixed interest rate

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.

Floating interest rate

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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