Hidden home loan charges are unfair, deceiving and fraudulent practices by the banks in order to make more money from the commoners. There are no steadfast rules followed in this area of the banking sector. There are no definite guidelines of hidden charges because it is molded from time to time depending on the situation. The following are few of the hidden charges of home loan.
- Conversion Fees
This is one of the most common types of charges. Conversion fee is paid when a given type of loan is being switched. This is the charges you pay in order to reduce your interest rate all throughout loan tenure. During the loan tenure, the interest rate can be switched from floating rate to fixed rates or from fixed rates to floating rates. For example: if a home loan was taken by you at 13% which is 10% base rate with an additional 3% mark up, but overtime your bank is offering loans at just 10.35% and you still pay 13%, you can reduce your rate of interest by decreasing the 3% mark up to 0.35%. But the banks will charge for this conversion and that is called conversion charges.
- MODT Charges (Memorandum of Deposit of Title Deed)
Memorandum of Deposit of Title Deed (MoDT) is something in which the borrower has given up all documents of his property to the bank willingly. This is done in order to get a financing from bank. Our government also charge stamp duty while registering the same. The MoDT charges varies in each state, it is normally given at 0.1 to 0.2%. If in case the borrower fails to pay the payment on time, the lender gets the rights to the borrower’s property using the title deed as evidence.
- Processing and Administration Fees
The processing and administration fees are the charges that are charged during the processing of the loan. Usually these charges are paid under the ‘processing fees’ although few other banks charge these fee separately.
The processing and administration fees are charged during the time a loan is applied and if the home loan is rejected, the charges cannot be re-funded. The usual charges are 1% i.e., a sum of Rs.5000/- and with few negotiations, the processing fee can be reduced considerably. There are few banks that give an offer of zero processing and administration fees.
- Retrieval of Document Charges
These are the charges that are applied when retrieving the documents i.e., during a loan closure or a pre-closure of loan. The document retrieval charges are the charges that are charged during the transfer of the original documents to the borrower from the bank.
- Technical and Legal Charges
Many National and corporate banks consist of a legal and technical professionals who verify the documents but, few other banks do not have such a team and they depend on outsource agents for verification purpose. So, the fee given to such experts are obtained from the legal and technical charges.
- Late Payment of Fees
The additional charges incorporated by the banks when the EMI payment is delayed, is called the Late Payment Fees. The borrower is supposed to pay a Late Payment fee of ₹ 500 or 2% additional interest per month as penalty.
- Prepayment Penalty
If the loan is paid before the end of the term of loan, either completely or little by little in bulk amounts, the banks charge a prepayment penalty. The prepayment fee is applicable only on fixed and not on floating rates of interest.
- Loan Tenure Resetting
If the borrower wants to reduce or increase his monthly EMI, that results in the modification of the loan tenure. For instance if a loan of 50 lakhs was taken for 60 months the EMI will come up to Rs. 83,333/-. But if you want to reduce the EMI to 48 months , then the EMI will again increase to a sum of Rs. 1,04,166/-. For which the banks charge a fee of Rs. 500/-.
- Recovery Charges
If you fail to pay the EMI for a month or so, the bank needs to undergo certain technical procedures in order to recuperate the cost. Therefore, the banks charge an additional recovery fee from the borrower.
- Getting List of Documents (LoD)
While submitting the original documents for applying for a loan and if you require a photocopy of all the documents, then the banks charge an additional amount of Rs. 570/-.