Hidden Charges on Home Loan

Do you dream of owning a house? If so, then you are likely aware of how significantly it can impact your finances, from the initial down payment to property taxes, insurance, and maintenance expenses. But, did you know that home loans can come with several hidden costs?

In this article, we will guide you through home loan hidden charges so that you can make more informed financial decisions.

Table of contents

• Overview of home loans
• Importance of understanding hidden charges
• Hidden charges associated with a home loan
• Conclusion
• FAQs

Overview of home loans

Home loans are financial products where a lender provides funds to you, the borrower, to purchase a home, renovate, or expand an existing property. These loans typically involve a principal amount, which you repay over a specific period of time, along with interest. The property being purchased serves as collateral for the loan, meaning if you fail to repay the loan, the lender has the right to foreclose on the property to recover the outstanding debts.

Importance of understanding hidden charges

When you are looking to apply for a home loan, it’s important to be aware of the often overlooked, hidden charges that may accompany the process. From prepayment penalties and conversion charges to stamp duty and registration fees, these charges can quickly add up.
To make an informed decision, you should consider the following points:

Careful review of loan documents

Thoroughly examine all loan documents, including the loan estimate and closing disclosure. Pay close attention to itemised lists of home loan fees and charges.

Ask questions

Don’t hesitate to ask your lender about home loan charges or home loan processing fees that are unclear or not adequately explained. Seek clarification on any terms or conditions you are unsure about.

Read the fine print

Take the time to read and understand all the terms and conditions of the loan agreement. Look for any clauses related to additional fees or charges that may apply under certain circumstances.

Consult with professionals

Consider consulting with a real estate agent, financial advisor, or attorney who can provide guidance and insight into the home-buying process. They can help you identify potential hidden costs and ensure that you are making informed decisions.

Hidden charges associated with a Home Loan

Let us look at the 10 most common home loan hidden charges:

Inspection charges

Inspection charges refer to the fees associated with property assessments, including home inspections and appraisals, to evaluate your property’s condition and value before loan approval.

Late Equated Monthly Installment (EMI) payment penalty

Late EMI payment penalties are charges imposed by lenders when you fail to make your monthly loan repayments on time, serving as a deterrent against delayed payments.

Loan prepayment charges

Loan prepayment charges are fees levied by lenders when you choose to pay off your home loan before the agreed-upon tenure, compensating the lender for the loss of anticipated interest income.

Stamp duty and registration charge

Stamp duty and registration charges are government-imposed fees payable upon registering the property transaction and loan agreement, varying based on the property's value and location.

Charges for home loan account statement

Some lenders may levy charges for home loan account statements. They entail fees for receiving detailed statements of your loan account, providing breakdowns of principal, interest, and additional charges incurred.

Memorandum of Deposit for title deed charges

Memorandum of Deposit for title deed charges refers to the registration fees associated with securing the lender’s interest in the property by depositing the title deed as collateral.

Fee for change of home loan tenure

This fee is applicable when you opt to change the repayment tenure of your home loan, either extending or shortening the loan duration, subject to lender policies.

Incidental home loan charges

Incidental charges on home loans include miscellaneous fees not explicitly categorised, such as documentation fees, credit report fees, or courier charges, incurred during the loan application and processing.

Recovery charges

Recovery charges are fees incurred by you when lenders initiate legal proceedings to recover outstanding loan amounts in case of defaults or legal actions, covering expenses related to debt collection efforts.

Goods and Services Tax (GST)

GST is a government-imposed tax applicable to certain charges and fees associated with home loans, including home loan processing fees, documentation charges, and other applicable services.

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Conclusion

Navigating through the home loan process involves not only understanding the benefits and procedures but also being aware of the hidden costs of buying a home that may come as a surprise.
By carefully reviewing loan documents, asking questions, reading the fine print, and consulting with professionals, you can better identify and understand these hidden charges and make informed decisions about your home loan.
SMFG Grihashakti makes housing finance easy with quick 72-hour loan processing* (depending on your eligibility and successful verification of loan documents) and no hidden fees. You can also check your home loan eligibility and calculate your EMI with our home loan eligibility calculator and home loan EMI calculator, respectively. Apply online or contact us to know more.