Mortgage Processing Fees and Other Charges in India: What to Expect

Introduction to all the mortgage charges

Buying a home is exciting but it comes with many costs, especially when getting a Home Loan. Understanding these mortgage fees and charges is crucial - it's not just about reading the fine print but about making smart choices that can save you money over time. From basic mortgage loan processing fees to hidden costs, we'll guide you through everything you need to know. This information will help you avoid surprises and make your dream of owning a home a reality without unexpected financial stress. 

Late Payment Charges

Late payment fees are mortgage charges you'll face if you don't pay your monthly loan installment (EMI) on time. Banks usually set these fees as a percentage of what you owe. For example, if you're late paying a ₹10,000 EMI, and the fee is 2%, you'd owe an extra ₹200. These fees can add up quickly, making your loan more expensive. They can also hurt your credit score, making future borrowing harder or costlier. To avoid these mortgage fees, always try to pay on time. 

GST on Services

GST, or Goods and Services Tax, is an extra cost added to many of the services you'll use when getting a Home Loan. This includes things like processing fees for mortgage loans and paperwork charges. Currently, GST is set at 18% for most banking services. This means if your mortgage fee is ₹10,000, you'll actually pay ₹11,800 because of the added GST. It's important to remember this tax when you're planning your budget for a Home Loan. GST applies to various charges throughout the loan process, not just at the start. Remember, GST also applies to other costs like valuation charges for home loans, which are essential in determining your property's worth.

Mortgage Processing Fees

1. Processing Fee: Lenders typically charge a processing fee to cover the administrative costs of evaluating and processing your mortgage application. This fee is non-refundable and is usually a percentage of the loan amount or a fixed amount. It's important to inquire about the processing fee upfront and factor it into your budget.

2. Legal and Documentation Charges: Lenders may also impose legal and documentation charges to cover the costs associated with verifying property documents, conducting legal checks, and drafting the loan agreement. These charges ensure compliance with legal requirements and protect the interests of both the lender and the borrower.

Other Charges

1. Appraisal Fee: An appraisal fee is charged to assess the value of the property being mortgaged. Lenders hire professional appraisers to determine the fair market value of the property. The appraisal fee may vary depending on the property's location and size.

2. Valuation Charges: Valuation charges cover the cost of evaluating the property's condition and marketability. These charges are often applicable to resale properties or properties in specific locations.

3. Stamp Duty and Registration Charges: Stamp duty and registration charges are levied by the state government on property transactions. These charges vary from state to state and are based on the property's value or the transaction amount. It's important to understand the stamp duty and registration charges applicable in your specific location.

4. Prepayment or Foreclosure Charges: Some lenders may impose prepayment or foreclosure charges if you decide to repay the loan before the agreed-upon tenure. These charges are meant to compensate the lender for the interest income they would have earned if the loan had continued for the entire tenure. It's advisable to review the prepayment or foreclosure charges before finalising a mortgage.

5. Late Payment Charges: Late payment charges are applicable if you fail to make your mortgage payments on time. These charges are imposed as a penalty and can vary from lender to lender. It's important to be aware of the late payment charges to avoid any financial difficulties.

The Final Word

When applying for a mortgage in India, it's crucial to be aware of the various fees and charges associated with the process. Mortgage processing fees, legal and documentation charges, appraisal fees, stamp duty and registration charges, prepayment or foreclosure charges, and late payment charges are some common charges you may encounter. Understanding these charges helps you estimate the total cost of your mortgage and make informed financial decisions. It's advisable to compare the fees and charges offered by different lenders to find the most competitive option for your specific requirements. 

Frequently Asked Questions

1. What is an appraisal fee?

Ans. An appraisal fee is charged to assess the value of the property being mortgaged. 

​2. How are stamp duty and registration charges calculated?

Ans. Stamp duty and registration charges vary from state to state in India and are based on the property's value or the transaction amount.

3. Are mortgage processing fees negotiable?

Ans. Yes, mortgage processing fees are often negotiable. Discuss with your lender to potentially lower these charges.

4. Are credit report fees included in mortgage processing fees?

Ans. Usually, credit report fees are separate from mortgage processing fees, but some lenders may include them.