Securing a home loan is the first step towards achieving your dream home. In addition to the monthly instalments there will be some expenses involved in taking a home loan. So, it is important to remember that there are several other important miscellaneous expenses which you should factor into your financial plan.
While you will be paying 10-20% of your home purchase price as a down payment, along with an interest rate on your loan of 8.5-12% depending on the kind of property being purchased and your income statements. There are the other expenses you will have to incur while taking out a home loan.
The processing fee is included as a part of your home loan application and is non-refundable regardless of whether your loan is approved or not. The entire processing fees is divided into two parts. Initial login fee which is to be submitted along with the application form enabling the financial institution to process your application for sanction. This fees is generally not refundable as it takes care of the expenses incurred by the institution in verifications for sanction of application. The balance processing fees is taken when one applies for disbursement of the sanctioned facility. The overall processing fees ranges between 0.5% – 2% varying from institution to institution and also depends on the property being purchased.
Legal & Technical Charges
There are some financial institutions who would upon identification of property and upon submission of property documents for disbursement, charges what is called as the legal and technical fees. For all such properties are the legal documents are vetted for its authenticity and searched for close to 13 years to ensure that are no historic encumbrances. Such properties are also technically vetted to establish a fair market value of it and also to ensure that it is built as per state bye laws. Such legal and technical fees put together can range from Rs 5000-10000
GST on Fees
Institution will charge you GST (currently 18%) on all fees payable.
Stamp Paper Cost
After your loan has been sanctioned and approved, the bank or lending institution will ask you to buy legal stamp papers to write down the official agreement between you and them. This is a nominal charge of Rs. 300, and is not included in your processing fees.
Home Insurance Premium
It is critical to remember that home insurance is mandatory for everyone who takes out a home loan. The cost of home insurance premiums usually varies between 0.1-0.2% of the value of your home. For instance if your property is worth Rs. 30 lakhs and the rate of premium is 0.1%, your premium will be Rs. 3,000. Home insurance premiums can be paid in a one-time lump sum payment when your loan has been approved or can be made in the form of yearly payments. Most of the financial institutions have a facility of taking one time property insurance and this premium is also assisted as a part of the loan amount.
Please note that the above expenses do not make any mention of the property related expenses which can be the stamp duty payable, property brokerage ( if applicable)
It is important to remember that a home loan is usually one of the biggest loans a person takes and it is a long term and a huge financial commitment. Knowing all the costs involved in taking a home loan can help you manage your other finances better.
(By Rishi Anand, Chief Business Officer of Aadhar Housing Finance)