Home Loans in India are pretty lucrative, as they let you buy a property in India. The low-interest rates and flexible repayment terms make it attractive to home borrowers, but the truth is that processing fees can add up and make your Home Loan unaffordable. And processing fees are an essential aspect of it, so always look for genuine lenders that offer great loan packages at affordable prices.
Don’t worry, though! We have compiled this comprehensive guide on processing fees for a Home Loan, which will help you understand how much they should cost.
Understanding Home Loan processing fees
Home Loan processing fee are the costs that the lender incurs to process your Home Loan application. In other words, processing fees are the charges the lending bank makes to process a loan request. You can pay the processing fees via cash, cheque, or online banking.
These fees are chargeable when you apply for a Home Loan in India. Many factors affect your Home Loan application, including credit history, down payment amount, employment status, and location.
For example, you need to check with various lenders to determine the processing fees for Home Loans in different states. And then compare them based on features like interest rate and closing cost.
The process of applying for a Home Loan is straightforward, and there are two main stages: pre-approval and approval.
- Pre-approving your finances with a lender allows you to assess your ability to repay the money required for your new home. Once you’ve been pre-approved, it’s time to get approval from your lender, who will verify your information before signing off on your loan application.
- Once approved, you’ll need to pay a processing fee before being able to take out a loan. It depends on the loan you’re taking out (home equity loan vs mortgage). The total amount payable is based on the size of your down payment, but there will also be a fee associated with closing costs. And these all include legal fees, appraisal costs, inspection fees, and other miscellaneous expenses that come with closing on a home purchase.
How much are the processing fees?
Read a similar blog: Benefits of Using EMI Calculator before Applying for a Home Loan
Processing fees are a percentage of the total amount of your loan, with the average processing fee being 3%. The average processing fee is lower than most other fees you pay when applying for a mortgage. However, knowing how much each lender charges is crucial because it can affect your ability to qualify for a particular loan.
How to avoid or reduce the processing fees?
The good news is that there’s an easy way to avoid or reduce these fees and keep more of your hard-earned money. Here’s how:
- Look at the processing fee separately from other costs like insurance, appraisal, title search, etc. Then, compare it with all the additional Home Loan costs.
- Get quotes from multiple lenders before deciding on one. Compare each lender’s processing fee with the other costs involved in getting a Home Loan and see which lender has the lowest overall cost.
- Pay a large downpayment to reduce the loan requirement. This way, the loan processing fee also reduces. And the lower the processing fee, the less will be your additional cost on the home purchase. Plus, a large downpayment helps you negotiate for a lower rate of interest as there is not much risk involved in a smaller loan amount.
Overall, understanding processing fees for Home Loans can be complex and confusing. However, following the guidelines outlined in this article can make you more confident and prepared when it comes time to apply for a loan. It is important to remember that you should always ask questions and do your research to understand the costs associated with a loan. And if you keep doing so, it can help you make a more informed decision and save your money in the long run.