Interest prices are the foremost priority to consider when you are going to apply for a home loan. These interest rates need to be assessed and determined besides considering various kinds of fees and costs that the prospective buyer has to pay irrespective of your home loan endorsement instance. Although, it is always recommended for borrowers to relate supplementary charges such as administration charges, processing fees, conversion costs, etc besides interest rates while applying for a home loan with a specific bank. It gives a financial perspective for taking an appropriate decision recognizing all home loan overheads.
Processing Fee (PF)
Processing Fee is applicable while accumulating documents for administering the home loan underwriting and assessment. The processing fee of all banks and financial institutions are more or less the same. Evaluate the processing fee because, at times, it does not contain some costs for processing of home loan statement. These extra charges are further credited above the processing fee. Always remember that the processing fee is non-refundable even if you haven’t been sanctioned for buying a home from a reputed builder in Kolkata. In a few exceptional cases, lenders don’t consider processing fees, especially when they wish to acquire more home loan customers. The processing fee varies from lender to lender and the rates vary from 0.50 to 1.00 percent of the home loan amount.
CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest) Fee
CERSAI was discovered to analyze mortgage scams where anybody takes as much loans upon the same benefit from most of the banks. It describes the process for recording the registration act of securitization, benefit refurbishment, and safety outcome of banks and financial institutions. Lenders can get the property registry by financing the compensation amount that they get from the borrower as a part of the CERSAI. The CERSAI fee has to be paid irrespective of loan approval or not. It is also identified as a memorandum of deposit of title deed (MOD) charge.
Most of the lenders also add administration fees. This is not contained in the processing fee and is non-refundable. These charges particular include the technical and legal confirmation costs. Every bank and financial institutions has an empanelled investigator on the board that assesses the property growth evaluation in terms of law and gives a detailed statement on it. This report is further used to assess whether to sanction the home loan or not.
Late Payment Charges
These are the fines applicable on the Associated Monthly Instalments (EMI) of home loans if you skip any of the EMI for a particular month. Beware of not skipping any of your monthly EMI’s as it will lead to pay you a heavy penalty which accounts for an increase of 2% of the overdue amount.
If you pay more than what new home loan borrowers are paying, you can also shift to the lower range of interest rates by paying a ‘conversion fee; to your existing home loan lender. Many lenders impose 25-50 basis points of the outstanding home loan amount in order to calculate the conversion fee.
Higher the spread between the new and old interest rate, the conversion rate gets higher for the borrower to pay to the bank. This brings down the home loan tenure. Due to which, many of the home loan borrowers consider shifting to a new lender as soon as the interest rates fall in order to escape the conversion fee payment. But this step makes some monetary sense because the new financial lender will also levy processing fees to boost up your outstanding home loan amount (this step, at times, becomes exempted in specific cases).
Quick Tips on Conversion Fee
- Do not shift to another home loan at a lower interest rate even if you have an outstanding home loan for a short duration. This won’t make sense as you will end up paying additional fee i.e. the conversion fee for the balance tenure of five years or lower. You will also end up paying somewhat lower monthly instalments, but there will be little difference in the entire loan cost.
- Compare what is more suitable in terms of savings –remaining with the existing lender by paying a conversion fee or shifting to a new lender with a processing fee payment. If the processing fee gets waived off with a new lender, you must go for shifting your home loan (i.e. Balance Transfer of your home loan).
This is one of the addendum you should be cautious while going for any home loan agreement. Most of the banks or financial institutions levy pre-payment fees but do not impose the pre-payment fee on floating rate home loans. When the prepayment of a home loan is made by the borrower, before the duration of the fixed home loan, the borrower needs to pay a pre-payment fine applicable on it. It is more advantageous to make expenditures in opportunities that provide better returns or interest and income on your home loan payment.
List of document (LOD) fees
While sanctioning home loans, lenders collect all the documents relating to the mortgaged property. Later on, if the home loan borrower wants a hard copy of such documents, banks charge LOD fees. This can vary from Rs 200 to Rs 500. Therefore, it is recommended for every borrower to keep the original copies of the documents to avoid such charges later on.
At last, it is a wise decision to go through all the clauses and provisions along with the additional charges mentioned in your home loan agreement. Consult your credit offer in detail with your relevant queries so as to get down to the fast settlement of your home loan process.