What Are The Different Types Of Fees And Charges Involved In A Home Loan?

Interest rates are not the only charges that you pay when you avail a home loan. Other fees are also involved that add up to the total cost of the loan.

While borrowers often compare only the interest rates applicable, ignoring other charges may push up the total cost. Therefore, it is essential that you compare these charges to get an affordable home loan.

Standard charges and fees to home loans

Processing fees

Processing fee for a home loan is one of the primary home loan fees and charges you have to pay while applying. It is charged by a lender to process the submitted documents, evaluate the property, etc.

If you opt for a Home Loan from lenders who provide the statements online, you don’t have to pay additional statement charges, which reduces the total processing fee amount.

Different Types Of Fees And Charges Involved In A Home Loan

Processing fee for a home loan is a mandatory, one-time, non-refundable fee you have to pay when applying. It generally varies between 1% and 2%. However, the lowest processing fee can reach up to 0.80% for salaried individuals and 1.20% for self-employed individuals.


It is essential that you compare available interest rates in the market before choosing your lender. A low-interest rate considerably reduces the EMIs you have to pay, thus making repayments affordable.

NBFCs offer one of the lowest home loan interest rates in the market both for salaried and self-employed individuals. These interest rates are calculated based on floating reference rates followed by the lender.

Foreclosure and Part-prepayment Charges

Foreclosure and part-prepayment charges are applicable when you choose to repay the outstanding principal amount any time before the tenor ends.

You can use a part-prepayment calculator to determine the interest amount you save by prepaying the loan.

Also read: Know These Smart Ways to Save Taxes on Your Home Loan

Since the charge calculation is done on the present outstanding amount, a higher rate of interest will lead to a steep rise in the total cost of loan. Lenders provide foreclosure and part-prepayment facility without any additional charges with Home Loans are availed with a floating rate of interest.

Penal Interest

It is a penalty you need to pay in case you default on EMI payment as on the due date. A penal interest charge is at around 2% and is taxable.

Mortgage Origination Fees

It is a one-time fee which lenders charge as an upfront payment during the processing of a home loan. Hence, it is collected along with the processing fee for a home loan.

Also read: How Millennials Can Strategically Pay off Their Student Loans Faster?

Secure Fee

It is charged to maintain and secure online transactions related to the loan.

EMI bounce Charges

This charge is levied if the cheque issued for EMI payment bounces for any reason; insufficient balance in your account being one of them.

Make sure you check the entire schedule of charges applicable on different types of home loans and read the terms and conditions carefully before applying. Choose the lender with the most affordable charges.

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Priya Bagga 

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