Before availing a home loan, it is important to consider all additional costs. One such cost is the home loan processing fee which can range from 0.50% to 2% of the borrowed principal up to a certain sum. This fee compensates the lender for several unavoidable expenses like underwriting, property appraisal, income verification, etc.
However, the landscape for levying this charge differs from one lender to another. Details about this have been discussed below.
Breakdown of the processing fees and charges for home loans
Borrowers should be informed about the processing charges before they finally accept a loan offer. It is not a uniform fee and lenders may revise their rates based on the market situation. Also, certain banks and NBFCs charge the processing fee as a fixed amount while others levy this charge as a percentage of their approved loans.
In case someone has been planning to opt for home loan for quite some time, they can benefit from occasional deals when some lenders waive their loan processing fee. To stay aware, an individual visit their preferred lender’s website and allow personalised alerts.
Thus, all loan applicants must check the market to compare home loan interest rates and other charges offered by various lending institutions. This will result in a more informed decision and subsequently fewer expenses.
Other applicable fees associated with home loans
Besides the processing fee, these are a few charges that get tagged as additional costs of a home loan:
Stamp duty and registration charges
State government charge these fees. So, the government levies the property registration fee and stamp duty on a newly bought property.
Document verification fee
Lenders ask for this fee to verify a borrower’s ID proof documents, income documents, etc.
Valuation fee
It refers to the sum that a lender needs to pay professionals who can determine the actual market worth of a property.
Steps to apply for an online home loan
Here’s a step-by-step breakdown describing the entire procedure of applying for a home loan online:
Step 1: Visit the official website of the preferred lender.
Step 2: Navigate to ‘Apply for home loan’.
Step 3: Next, one must check their eligibility by going through the related section.
Step 4: If a candidate is eligible, they must carefully go through the various home loan types by clicking on ‘More Information’.
Step 5: Specify whether their chosen property has been shortlisted or not.
Step 6: Add the basic details under the applicant’s section in the online form. One can also proceed to add name(s) of co-applicants.
Step 7: After filling in all the mandatory information one must click on ‘Submit’.
Step 8: Now, the portal will ask to feed in the soft copies of several documents required for KYC verification. So, the applicant must follow the instructions carefully.
Step 9: At this stage, the potential borrower must check all the loan details and associated offers, if any.
Step 10: Finally, the home loan processing fee needs to be paid online to complete the application process.
How to calculate home loan EMI?
There is a fixed formula to evaluate the EMIs for a home loan, which is –
E = [P x R x (1 + R) ^N] / [(1 + R) ^N – 1]
In this equation, E stands for the EMI amount. On the other hand, P signifies principal, R stands for rate of interest, and N denotes the tenor in number of years.
However, this manual technique is error-prone, especially for first-time borrowers. Thus, to avoid ambiguity while calculating, it is advised to take the help of a home loan calculator.
These are some added advantages of using a home loan calculator:
- It takes account of the loan type and thus returns accurate results each time.
- The facility is free to use and thus a prospective borrower can try out different values until they reach a favourable principal and tenor.
- An online loan calculator saves everyone’s time.
Several lenders offer pre-approved loans to selected clientele with healthy credit profiles. These offers are related to loan products like LAPs, home loans, etc. Candidates can give their contact details to these lenders to check their eligibility for these deals.
Once the doubts regarding the ‘home loan processing fee’ are cleared, applicants should always add all the applicable fees and the interest payable for a loan. This will help to choose the best possible option and lead to lower expenses for a long time.
