7 Unknown Costs Associated With Home Loansby Rudra Raghavan Financier
The purchase of a home requires a lot of finances, and during the purchase of a home the individual would not have the finances to carry out the purchase of the home. In such situations, the individual can opt for a home loan. A home loan is a loan product provided by financial institutions. In a home loan, a lump sum amount of money is borrowed from a financial institution. The financial institution will provide the loan amount to the customer for the purchase of the home. The home loan is provided at a certain interest rate. The repayment on a home loan is done through equated monthly instalments (EMIs) for a tenure.
In this method of repayment, the customer who has opted for the loan will have to make monthly repayments on the loan for a set tenure period, until the complete amount has been repaid. A home loan is an effective way of gathering funds for the purchase of a home. Through a home loan, the customer can get a flexible tenure making the process of repayment easy for them, there is hassle-free documentation involved in a home loan, and with the advancement, in technology, the customer can easily apply for the home loan online.
Availing a home loan involves a lot of options, it requires for the customer to choose the right financial institution which will best suit the requirements of the customer. It is advised that a customer conduct research before choosing a financial institution. Opting for a house loan is not a long process, but it does involve multiple costs which are hidden.
7 unknown costs associated with home loans:
1. Processing fee:
The processing fee is the fee which is charged for processing the loan. Generally, it is around 0.5% - 1% of the loan amount. The percentage will depend on the borrower’s profile, income and loan type.
2. Legal fee:
Some financial institutions will charge this fee for legal documents like sale agreements. Some corporations may include this cost into the processing fee.
3. Technical valuation charge:
The financial institution will carefully scrutinize the property which the customer intends to buy. The financial institution will send an expert, who will check the site for legality and fair value of the project. The valuation will be done on criteria’s such as the age of the building, quality of construction.
4. Franking fee:
Franking is the process of confirming the payment of stamp duty. So, when the customer pays stamp duty for sale of agreement or purchase of a loan, an authorized bank or a franking agency may stamp their document to certify stamp duty payment.
5. Notary fee:
If the customer is an NRI, then they will need to provide their KYC details which are to be notarized by the Indian Embassy or a local notary available abroad.
6. Cheque dishonour charges:
If at any point in time, the customer fails to make the EMI repayment on time the financial institution will charge the customer for it. This will affect the credit score of the customer.
7. Loan pre-payment fee:
When the customer makes a pre-payment, the financial institution will lose out on the opportunity to earn from the interest payment.
Created on Feb 1st 2019 05:55. Viewed 495 times.