Processing Fees and Other Hidden Charges You Pay to the Bank

Processing fees is the most initial fee charged, which forwards the costs to the borrowers for their documentation, appraisals, employment and credit history, or any other information necessary for the lender’s underwriting department.

Along with the processing fees, home loans come with several other fees, charges and penalties. Not all banks levy all the charges mentioned below.  Often banks employ different terminologies, and some may even club multiple of these under the same type of fee. However, you must be aware of how much you are expected to pay while you have a housing loan.

The fees have been broadly classified under –

Loan-related Fees

Document-related Fees

Legal and Government Fees

1. Loan-related Fees includes –

• Login Fee: Also called the Administrative Fee or Application Fee, it is a non-refundable amount charged when you apply for a loan, even before your loan is approved. Once your loan is approved, you have to pay the processing fee, which will be charged minus this amount.
• Prepayment Charge: It is otherwise known as Foreclosure or Preclosure Charge, and is applicable if you pay off your home loan in full before the end of the tenure. Usually banks don’t charge foreclosure fee for floating rate loans and for individual borrowers (as opposed to companies). This fee ranges between 2% to 6% of the outstanding amount.
• Partial Prepayment Charge: It is called a Part-payment Charge or Part Prepayment Fee, levied by banks if you are paying off a part of the balance amount and not in full. There is no charge again for floating-rate, otherwise the fee ranges from 0.5% to 2% of the balance loan amount.
• Late Payment Fee: It is also known as Penal Interest Rate and is charged on delay payments of EMIs. It is usually between 2% to 3% of the defaulted amount every month until the payment is made.
• Conversion Charge: If you wish to convert your floating-rate package to a fixed-rate one or vice versa, then Switching or Conversion Fee is applied. The charge ranges from 0.25% to 3% of the balance amount.
• Repayment Mode Swap Charge: You will have to pay this fee if you want to change the repayment method or dates. It’s usually Rs.500 per request.
• Recovery Charge: If you do not pay your EMIs, your account goes into default, the bank/lender will take action, and charge a Recovery or Collection Charge from you. It is charged depending on the actual expenses of the process.
• Insurance Premium: Though it is not mandatory to buy a home or life insurance policy, banks will insist that you insure your property against physical damage and make them the beneficiary, to help the banks cover their losses. So, remember to add the premium amount to the home loan.

2. Document-related Fees

• Stamping Charge: Any legal document between you and the bank needs to be signed on stamp paper. The charges incurred will be charged to you.
• Income Tax Certificate Charge: Rarely do banks charge you for a provisional or final income tax certificate towards your home loan interest and principal repayment. However, when they do, it will be between zero to Rs.500.
• Interest Certificate Charge: If you need a certificate of the amount of interest you paid during your loan repayment from the bank, you will have to pay zero to Rs.500 per request.
• NOC/NDC Charge: The fee you have to pay to get a No Objection Certificate (NOC) or No Dues Certificate (NDC) fee ranges from zero to Rs.500 per request.
• Agreement Copy Fee: For a copy of the loan agreement, you will have to pay from zero to Rs.500. These charges are applicable to any document that you request from your lender.
• Issuance Charge for Photocopy of Title Documents: As the originals will be with the bank until the loan is completely repaid you have to pay between zero to Rs.1,000 each time you request for a copy of your property’s Title Documents.
• Amortization Schedule Issuance Fee: If you want a detailed amortization schedule for your loan tenure, then you have to pay between zero to Rs.250 per request.
• Document Retrieval Charge: Applicable at the closure of loan, you need all the original documents of your property back from the bank for which you pay charges from Rs.500 to Rs.5,000.
• CIBIL Report Fee: If you want a copy of your CIBIL credit report, you will have to pay between zero to Rs.1,000 per instance.

3. Legal or Government Charges

• Legal Fees: This amount has to be paid for all the legal expenses for making of the home loan agreement. This can include certifying any document or for drawing up the tripartite agreement among you, the builder, and the bank. It is based on actual amount charged by the legal advisor/lawyer.
• Valuation/Inspection Fee: The bank levies this charge for legal valuation and inspection of the property you are buying and pledging for the loan.
• MOD Charge: Memorandum of Deposit of Title Deed (MoD) confirms that you’ve given your property’s title deeds/ownership papers to the bank as collateral for the loan. It is typed out on a non-judicial stamp paper and can be used if your property is involved in a legal problem.

Make sure you read the MITC (Most Important Terms & Conditions) document and the loan agreement, they will have all the kinds of fees and charges applicable to your loan.

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