Home Loan hidden charges are back in limelight as the banks are finding newer ways to make more money out of you. Home Loan hidden charges is a grey area & there are no clear cut guidelines regarding same. In India, transparency takes a back seat and regulatory bodies are also turning blind eye towards Home Loan hidden charges. I receive lot of complaints from my readers so i decided to write a post on this topic. Like the amount charged there is no standard definition of home loan hidden charges as banks keep moulding the definitions as per their convenience. Lets go though each of these Home Loan hidden charges
The most common among all Home Loan Hidden Charges is Conversion fees. It is the amount you need to pay to reduce your Rate of Interest during loan tenure e.g. You took home loan @ 12% i.e. Base Rate of 10% + 2% mark up. Now over a period of time bank reduced mark up for new customers to 0.25% & now offering home loans @ 10.25% but you are still paying 12%. Now you can decrease your ROI only by reducing mark up from 2% to 0.25%. For this bank will charge conversion fees. It varies from 0.5% to 1% of outstanding loan amount.
MODT Charges (Memorandum of Deposit of Title Deed)
Memorandum of Deposit of Title Deed is an undertaking by the borrower that he has deposited the title documents of the property with the bank at his own wish and will, in order to secure the financing obtained from the bank. Govt levy stamp duty on this document to register the same…Charges vary from state to state but is normally 0.1% to 0.2% of Home Loan amount. It is one of the most imp Home Loan hidden charges :)
Document Retrieval Charges
Document Retrieval Charges are the charges levied at the time of loan closure/pre-closure. It is basically a cost of transferring original documents from central document repository to the borrower. Normally all original documents received by banks are divided into 2 parts i.e. (a) Most Important documents like Sale Deeds, Sale Agreement etc and (b) General Documents like Khata, NOC from association etc. Most important documents are kept in safe custody at central repository and is being normally managed by 3rd parties. General Documents are kept at Loan Location.
Suppose you availed Home Loan in Chennai from HDFC Ltd. The central repository of HDFC is in Mumbai. All important documents will be shifted to Mumbai and general documents will be in Chennai. When the loan is closed, HDFC will charge document retrieval charges to transfer documents from Mumbai to Chennai. Best in class courier service is used for safe transfer. At the time of availing loan these charges are included in processing fees.
It should not be confused with Processing fees. Some banks charge administrative charges separately. These charges are levied to recover administrative cost of processing application. If we loosely define then processing fees refer to front end cost like DSA cost etc whereas administrative charges is levied for back-end processing of loan application. Bank might waive off processing fees but administrative charges will make up for same :)
Banks like SBI don’t have in-house lawyers to validate legal status of the property. They hire external lawyers for this job. The fees of these lawyers is being recovered from customers under the head Legal Fees.
Valuation Fees / Inspection Fees
Before sanctioning the loan, physical inspection of the property is done to fix the property valuation. It is done to ascertain that bank is not over lending because in case of default, bank can recover their dues only by auctioning the property e.g. If property valuation is 1 Cr and bank approve loan of 1.2 Cr. In this case bank cannot recover the dues in case of default. Obviously these charges are recovered from customer.
Home loan require lot of documentation like Home Loan agreement, MODT, Indexing etc. Though standard formats are used still there are charges involved in completing this documentation.
Switching Loan Package
In case you availed floating Home loan at the time of application and now wish to shift to fixed Home Loan or vice versa. Sometimes you wish to change your Home Loan package from one to another though loan remain linked to floating ROI. In all such cases bank will charge normally 1% of outstanding loan amount to process your request.
Changing Loan Tenure
If you to wish to increase/decrease your monthly EMI during loan tenure thus resulting in change of Loan Tenure. Bank might charge fees for the same.
Statement of Account
One annual account statement is free but in case you misplace or don’t receive & request another statement from bank then bank might charge upto Rs 500 per statement.
Copy of Original Documents
It is advisable to keep 2-3 copy of original documents before submitting to bank. if you request for photocopy from bank then bank might charge for same. Charges vary from Rs 2 per page to Rs 1000 for entire set.
If you default on payment then bank will charge entire cost of recovery i.e. Recovery Charges from you. Charges may vary from Rs 250/installment, some % of recovery amount or Actual recovery expenses incurred by bank if recovery is under SARFAESI ACT.
Though pre-payment charges are abolished but only for floating home loans. Some banks charge pre-payment penalty if funding is not from own source i.e. 3rd party funding including take over by other bank. Pre-Payment penalty still applicable for fixed home loans or loans availed under special schemes. This head is princess of Home Loan Hidden Charges :)
List of Documents
Quite strange but you might need to pay to get the list of original documents submitted by you with the bank.
Late Payment Charges
Last but not least any delay in EMI payment might be costly affair. Banks charge Late Payment Charges of Rs 250 + 2% additional interest as penalty on amount due.
Home Loan Hidden Charges list can go on but i tried to include almost all the important Home Loan Hidden Charges. If i missed any then please feel free to add through comments section of this post. Also note that banks might not charge all the above mentioned Home Loan Hidden Charges. Its advisable to check with bank on all these charges to avoid any future surprises. Sometimes most of these charges are clubbed under one head i.e. Processing fees.
1. RBI website has FAQ on Housing Loans. CLICK HERE to go through the same before availing Home Loan.
2. The Home Loan Hidden Charges mentioned in this post are tentative and exclusive of Service Tax.
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