This is for Desis who are thinking of going back to India.

Cost Of Home Loan In India – All The Expenses & Charges

http://www.am22tech.com/cost-of-taking-home-loan/

This article is meant to throw light on what all charges and fees you may be required to pay in case you want to take a home loan to finance your dream home. It is always better to plan for even small expenses which may come as a surprise to you in the process from applying till you actually sign the final loan sanction papers.

Here are various types of expenses that you would need to make to finalize your home loan:

1.Processing fees: This is the most common and prominent fees talked about when applying for home loan. This fees needs to be paid along with your loan application itself. The fees varies from 0.25% to 1% of the loan amount and is non-refundable i.e. you have to pay it irrespective of whether your loan gets sanctioned or not. If your loan application is rejected by bank for any reason, you won’t get this money back.Bank will use the processing fees to verify your documents and all the formalities to complete the loan processing.
Sometimes, banks do charge a flat processing fees for loans under 20 lakhs and another fixed amount above 20 lakhs of amount. But this depends on specific banks and the scheme which they are running at the time of application.It may also happen that you apply for a loan of INR 21,00,000 and pay a processing fees of INR 5250 @ of 0.25% and after all the processing, the final loan approved amount is INR 19,00,000. In this case, the bank returns the excess amount that you had paid earlier i.e. INR 500 (5250-4750).

2. Legal advisor fees: This is a fees that you have to bear to get the property’s papers verified and scrutinized by a legal advisory or a lawyer. A lawyer will check the past records and verify the title of the property. He will prepare a report on the basis of which bank will make its decision on whether the property can be financed or not. The report also talks about the approximate monetary value of the property.This fees is also non-refundable and needs to be paid with the loan application itself.If the property you are buying is part of a project that is already pre-approved by the bank, this fees is generally low i.e. approximately INR 1,000. The reason for this is that bank would have already verified all the papers of the whole project and do not need to go through the whole process for each apartment located in that project.
If the property is an individual one who’s records are already not available with the bank, then you may need to shell out approximately INR 3,000 for full verification.

3. Service tax on all bank fees: Service tax is another amount that is charged by banks on the amount that you pay them as fees. All fees are topped up by service tax which currently is 12% education cess (3%) making it equal to 12.36%. So, add this amount to the processing and legal adivisor fees.

4. Stamp paper cost: This is a nominal expense of about INR 300 which is required to buy legal stamp papers and write down legal home loan agreement between you and bank. Bank will ask you to buy these papers as they do NOT include this amount in processing fees.
This expense need to be made ONLY when your loan has been sanctioned and approved by bank.

5. Cost of Home insurance premium: Insuring your home is a good option but not mandatory if you DON’T take a home loan. But if you do, it is mandatory. This cost needs to be taken up by you. This amount comes out to be approximately INR 8,ooo for a property worth 40 lakhs. The insurance amount is required to be paid upfront after the loan approval and first disbursement by bank. The home is insured against any natural calamity and other threats which can potentially destroy your property.

6.Cost of Home LOAN insurance premium: Home loan insurance is different than home insurance in the sense that the first one insures you against the home loan liability and home insurance insures your property. Home loan insurance can also act as your guarantor in case your credit report is NOT good and bank wants you to provide a guarantee to support your home loan.This is a big expense if you opt-in for it. You may need to shell out approximately INR 65,000 upfront towards home loan insurance premimum for a loan of about 20 lakhs for a tenure of 25 years.The premium amount varies according to your loan tenure i.e. less premium for less tenure and vice-versa.

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Example

Let us consider an example and then find out the approximate cost of taking a home loan:

Property Cost 40 Lakhs
Home loan 20 Lakhs, 25 years
Processing Fees 0.5%
Guarantor Required YES
Home Loan Insurance Taken YES
Project already approved by Bank YES
Expense Amount (Rs.) (Approx.) Time of payment
Processing fees 10,000 At the time of Loan application
Legal advisor fees 1,000 At the time of Loan application
Service tax on all bank fees 1,360 At the time of Loan application
Stamp paper cost 300 After Loan has been santioned by bank
Cost of Home insurance premium 8,000 After Loan has been santioned by bank
Home LOAN insurance premium 65,000 After Loan has been santioned by bank
Total Cost Of Taking Home Loan 85,660
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So, you may need to shell out EXTRA 85,000 upfront to get a finance of 20 lakhs and it is a huge sum for a middle class family seeking a home loan.

The costs mentioned above are generally not clearly communicated when you are searching for a home loan. You will only get to hear about the processing fees most of the time.
The home loan insurance cost is a huge cost if you plan to go for it and if your bank requires you to have a GUARANTOR. If you don’t have anybody to back you up, you will have no other option but to buy this insurance.
The cost for home loan insurance which i have considered here is for a loan of 25 years. If it is about 7 years, the premium amount would come down to INR 20,000 from INR 65,000. So, you can reduce your tenure to save some money here.

The aim of this article was to throw light on various expenses which you HAVE to make even though you may have not incurred them if you had not taken a home loan. I hope it helps you in planning before staring your home loan process.

Bank Loans & house loans in India are not that straight forward as in Canada.