15 NOVEMBER, 2019

The home loan process has become more straightforward than it was in the past. Although knowing housing loan eligibility, documentation and paying EMIs are a few of the essential steps in this process, borrowers also need to pay specific attention to home loan fees and charges during different stages of the process. Following is the list of such costs and reasons behind them.

Fees to be paid to complete the Home Loan Application Process


Processing Fee (PF)

It is the non-refundable amount every housing finance provider charges to the home loan applicants. Home loan processing fees are charged to work on the cases of applicants and process their files. These are the mandatory charges paid by the home loan applicants to their lending institution to complete the process of application.

It is a common misconception that payment of processing fees guarantees the approval of the home loan application by the bank. In reality, lenders consider various factors including individual eligibility, credit score, etc. to sanction the home loan. Hence, there is a chance of application getting rejected even after paying the home loan processing fees if an individual is not eligible according to the guidelines set by the lender. 

Administration Charges

Generally, it is included in the home loan processing fees. However, many banks charge it separately. The banks and financial institutions mostly hire third-party agencies to verify the legal and technical aspects of the property and prepare reports on it. Such agencies charge the lender to prepare the reports and banks cover this cost from the home loan applicants as administration charges. This report profoundly influences the process of home loan sanctioning.

CERSAI Fee

Also known as a memorandum of deposit of title deed (MOD) charge, this is another mandatory charge that applicants need to pay to the lender at the time of submitting a loan application. CERSAI (Central Registry of Securitisation Asset Reconstruction and Security Interest) is the central online security interest registry of India. It was established to prevent people who used to take multiple loans against the single property from different banks. However, CERSAI fee is very nominal.

Fees to be paid while Paying Home Loan EMIs

The applicants need to pay certain charges while they are paying the home loan EMIs. Here are the list of such charges to be paid while paying EMIs-:

Late Payment Fees

This is penalty charges by the lender in case of delayed home loan EMIs payments. The borrowers should avoid these charges by making timely EMIs payments.

Pre-payment Charges

During the tenure of home loan, borrowers have to option to make pre-payments to pay off their loans before time. This home loan pre-payment can either be part-payments or full payment. Generally, banks giving home loans with floating interest rates do not charge any pre-payment fees. However, pre-payment charges are applied on the home loans taken from non-banking financial companies (NBFCs) or home loans having fixed interest rates.

Fee for List of Document (LOD) charges

Generally, banks or financial institutions acquire all original documents of the property while issuing a home loan. So, borrowers need to pay LOD charges if they wish to get a copy of original documents from the bank while paying the home loan EMIs. LOD charges are between Rs. 200 to Rs. 500. LOD can be easily avoided if borrowers keep a copy of the documents before submitting original to the bank.

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Disclaimer: This Article is for information purpose only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. Bank make no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Newsletter. The information contained in this Article is sourced from empaneled external experts for the benefit of the customers and it does not constitute legal advice from Kotak. Kotak, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein.