InvestorQ : I am planning to take a new home loan. What are the main charges associated with it?
Kunal Verma made post

I am planning to take a new home loan. What are the main charges associated with it?

Gauravi Patel answered.
3 years ago

There are a number of charges that banks charge home loan customers. Not all banks charge all charges but most of them have some charges or the other in place. Do note that the kind of charges and amount or percentage charged varies across banks.

Here are a few of the most common charges that banks levy to their customers:

- Processing fee

It is the fee charged by a bank for processing your fee when you apply for a loan. The amount charged could either be a percentage of the total loan amount or a fixed amount that is paid in lieu of carrying out the loan sanction formalities.

- Commitment fee

If you do not avail a loan within a stipulated time frame after it is processed and sanctioned, your lender might levy a commitment fee. By paying the commitment fee, you are assured that you can access the loan at the interest rate and for the tenure that was initially agreed on. Do note, however, that most banks no longer charge this fee.

- Pre-payment charges

If you pay off your entire loan amount before the completion of your loan tenure, then banks or non-banking financial companies (NBFCs) might levy a pre-payment charge on you. This penalty amount is also known as foreclosure/pre-payment charges and could be a maximum of 5% of the loan amount that is paid off before the completion of loan tenure.

- Miscellaneous charges

These are the various other smaller charges levied such as documentation, stamp duty, credit bureau report issuance charges and consultant charges.