Every loan has some extra costs attached to it. And for reasons best known to lenders most of these are hidden or coded. Get an approximate of the extra charges you may have to pay for your home loan. Here’s a list of a few such charges.
- Processing or administrative fees of any nature.
- Commitment fees (rarely charged these days).
- Legal fees payable to the lender or to the legal consultants of the lender.
- Stamp duty on creation of mortgage
- Prepayment charges
How do I find out if there are hidden charges in my home loan product?
There are other small or virtually hidden charges in a loan product.
Apart from the interest rate the consumer should consider the following charges:
Any processing or administrative fees of any nature,
Commitment fees though this is rarely charged nowadays,
Legal fees payable to the lender or to the legal consultants of the lender,
Technical or Valuation charges payable to the lender or to his technical consultant.
Stamp duty on creation of mortgage some banks charge this fee whilst other banks normally just have a clause that requires this to be paid in the event the state government actually charges this amount. The escape route for non-payment of this duty are progressively being eliminated and the fact that the consumer carries the liability to pay this duty in the future if demanded by the state government along with interest and penalties in the future. So, this should not really be used by a consumer to eliminate a lender just because he is paying this stamp duty to the government.
Prepayment Charges: This is the biggest charge that most consumers miss taking into account. More than 50% of the consumers will prepay their home loans and will incur this cost.
A loan can be prepaid either in part or in full at any given point of time. You can also prepay a loan even when it is only partly disbursed. However, most banks have an upper limit on the number of times a person can prepay his loan in a year as well as on the minimum amount you can prepay each time. Until recently, banks charged a penalty for part or full prepayment.
Increased competition has forced most banks to allow partial prepayment at nil charge. Most banks charge a prepayment charge if you make full repayment and ask for release of your property documents.