15 Home Loan Hidden Charges Banks

Dont Tell
Home Loan hidden charges are back in limelight as the banks are finding newer
ways to make more money out of you. Home Loan hidden charges is a grey area &
there are no clear cut guidelines regarding same. In India, transparency takes a back
seat and regulatory bodies are also turning blind eye towards Home Loan hidden
charges. I receive lot of complaints from my readers so i decided to write a post on
this topic. Like the amount charged there is no standard definition of home loan
hidden charges as banks keep moulding the definitions as per their convenience.
Lets go though each of these Home Loan hidden charges

Conversion Fees
The most common among all Home Loan Hidden Charges is Conversion fees. It is
the amount you need to pay to reduce your Rate of Interest during loan tenure e.g.
You took home loan @ 12% i.e. Base Rate of 10% + 2% mark up. Now over a period
of time bank reduced mark up for new customers to 0.25% & now offering home
loans @ 10.25% but you are still paying 12%. Now you can decrease your ROI only
by reducing mark up from 2% to 0.25%. For this bank will charge conversion fees. It
varies from 0.5% to 1% of outstanding loan amount.

MODT Charges (Memorandum of Deposit of Title Deed)

Memorandum of Deposit of Title Deed is an undertaking by the borrower that he has
deposited the title documents of the property with the bank at his own wish and will,
in order to secure the financing obtained from the bank. Govt levy stamp duty on this
document to register the sameCharges vary from state to state but is normally
0.1% to 0.2% of Home Loan amount. It is one of the most imp Home Loan hidden

charges

Document Retrieval Charges

Document Retrieval Charges are the charges levied at the time of loan closure/pre-
closure. It is basically a cost of transferring original documents from central
document repository to the borrower. Normally all original documents received by
banks are divided into 2 parts i.e. (a) Most Important documents like Sale Deeds,
Sale Agreement etc and (b) General Documents like Khata, NOC from association
etc. Most important documents are kept in safe custody at central repository and is
being normally managed by 3rd parties. General Documents are kept at Loan
Location.

Suppose you availed Home Loan in Chennai from HDFC Ltd. The central repository
of HDFC is in Mumbai. All important documents will be shifted to Mumbai and
general documents will be in Chennai. When the loan is closed, HDFC will charge
document retrieval charges to transfer documents from Mumbai to Chennai. Best in
class courier service is used for safe transfer. At the time of availing loan these
charges are included in processing fees.

Administrative Charges
It should not be confused with Processing fees. Some banks charge administrative
charges separately. These charges are levied to recover administrative cost of
processing application. If we loosely define then processing fees refer to front end
cost like DSA cost etc whereas administrative charges is levied for back-end
processing of loan application. Bank might waive off processing fees but
administrative charges will make up for same

Legal Fees
Banks like SBI dont have in-house lawyers to validate legal status of the property.
They hire external lawyers for this job. The fees of these lawyers is being recovered
from customers under the head Legal Fees.

Valuation Fees / Inspection Fees

Before sanctioning the loan, physical inspection of the property is done to fix the
property valuation. It is done to ascertain that bank is not over lending because in
case of default, bank can recover their dues only by auctioning the property e.g. If
property valuation is 1 Cr and bank approve loan of 1.2 Cr. In this case bank cannot
recover the dues in case of default. Obviously these charges are recovered from
customer.

Documentation Charges
Home loan require lot of documentation like Home Loan agreement, MODT, Indexing
etc. Though standard formats are used still there are charges involved in completing
this documentation.

Switching Loan Package

In case you availed floating Home loan at the time of application and now wish to
shift to fixed Home Loan or vice versa. Sometimes you wish to change your Home
Loan package from one to another though loan remain linked to floating ROI. In all
such cases bank will charge normally 1% of outstanding loan amount to process
your request.

Changing Loan Tenure

If you to wish to increase/decrease your monthly EMI during loan tenure thus
resulting in change of Loan Tenure. Bank might charge fees for the same.

Statement of Account
One annual account statement is free but in case you misplace or dont receive &
request another statement from bank then bank might charge upto Rs 500 per
statement.

Copy of Original Documents

It is advisable to keep 2-3 copy of original documents before submitting to bank. if
you request for photocopy from bank then bank might charge for same. Charges vary
from Rs 2 per page to Rs 1000 for entire set.

Recovery Charges
If you default on payment then bank will charge entire cost of recovery i.e. Recovery
Charges from you. Charges may vary from Rs 250/installment, some % of recovery
amount or Actual recovery expenses incurred by bank if recovery is under
SARFAESI ACT.

Pre-Payment Charges
Though pre-payment charges are abolished but only for floating home loans. Some
banks charge pre-payment penalty if funding is not from own source i.e. 3rd party
funding including take over by other bank. Pre-Payment penalty still applicable for
fixed home loans or loans availed under special schemes. This head is princess of
Home Loan Hidden Charges

List of Documents
Quite strange but you might need to pay to get the list of original documents
submitted by you with the bank.

Late Payment Charges

Last but not least any delay in EMI payment might be costly affair. Banks charge Late
Payment Charges of Rs 250 + 2% additional interest as penalty on amount due.

Home Loan Hidden Charges list can go on but i tried to include almost all the
important Home Loan Hidden Charges. If i missed any then please feel free to add
through comments section of this post. Also note that banks might not charge all the
above mentioned Home Loan Hidden Charges. Its advisable to check with bank on
all these charges to avoid any future surprises. Sometimes most of these charges
are clubbed under one head i.e. Processing fees.

Imp Note:

1. RBI website has FAQ on Housing Loans. CLICK HERE to go through the same
before availing Home Loan.

2. The Home Loan Hidden Charges mentioned in this post are tentative and
exclusive of Service Tax