If you are planning to avail financing for your house purchases, chances are that you are focusing on main factors like EMI, loan tenure and interest rate. But there are several other factors that can increase the cost or amount of loan.
But don’t confuse these factors with hidden costs associated with property (like PLC, cost of parking, etc.). The factors we will discuss are about home loan. Lets see which are these and how they impact your home loan:
Valuation Fees – When you submit you loan application, lenders carry out physical inspection of the property to ascertain that the lender is not over-lending. For carrying out this valuation exercise, lenders charge a valuation fee.
Legal Fees – like valuation fee, lenders might also hire external lawyers to validate the legal status of the property being borrower for. This legal cost is also recovered from customers. It might even be clubbed with valuation fee in certain cases.
Conversion Fees – Suppose you take a loan at 11% interest rate. But over time, the prevailing rates fall to 9.5%. If you want to switch to lower rates, then your lender might charge you 0.5% to 1% of the outstanding loan amount as conversion fee.
Fee for Loan Tenure Change – If you want to change your loan tenure which might impact your EMI (increase or decrease), then you need to pay fees to the lender for change in tenure.
Fee for Switching from Fixed to floating or Vice Versa – This is self explanatory. If you wish to shift from a fixed Home Loan to floating rate loan or vice versa, the lenders can charge upto 1% of outstanding loan amount as Switching fees.
Late Payment Charges – delay in EMI payment can result in lenders levying a Late Payment Charges.
These are some of the most important hidden charges that lenders might levy. This list is not exhaustive and there can be other charges too. But idea here is to make you aware that apart from EMI, tenure and interest rates, there are other things too that you need to pay attention while taking a home loan.