What is Processing Fees in Home Loans? - Home Loan Stories

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What is processing fees in Home Loans 1440 x 400

16 AUGUST, 2019

The process of buying a house is very straightforward when you are 100% prepared for it. The part of the house purchase process that scares many people, is the process of getting a home loan. From deciding on a bank with the most affordable interest rates to getting approval on the home loan, the entire process requires time as well as some preparations from the borrower’s end.

If you are on the verge of becoming a homebuyer, one essential part of the home loan process you need to understand is, processing fees.

What is home loan processing fees?

It is the non-refundable amount any financial institution charges to their customers for working on their cases as well as processing their files. In other words, home loan processing fees are the mandatory charges paid by the applicant of the home loan, after the application is submitted. The home loan processing fee is the one-time charge that borrowers are required to pay to the home loan lenders.

Home loan applicants need to note that paying processing fees does not automatically imply that their applications will be approved. The approval to a home loan application is directly influenced by the eligibility of an individual to re-pay the loan, among other factors.

Important things to remember about home loan processing fees:

Remember to check the terms and conditions of processing fees thoroughly, as sometimes it excludes other charges to be paid to complete the home application process, like admin charges etc.
As home loan processing fees are non-refundable, this is a one-time payment as part of the home loan application process.
In truly exceptional cases, loan lenders exempt some applicants from paying home loan processing fees. However, make allowances for this payment while applying for a home loan as it is not a common practice to waive this off.

How much processing fees do home loan lenders charge?

The amount of processing fees mostly depends on the amount of home loan. Generally, banks or other home loan lenders charge about 0.5% to 1% of the total home loan amount plus the additional GST (Goods and Services Tax) as processing fees.

However, the percentage of the total home loan amount charged as processing fees may vary from bank to bank.

Before starting the application process for a home loan, you need to submit documents required for a home loan. Along with the comprehensive set of documents serving as identity proof and address proof, there are separate set of documents required for salaried employees and independent business people. For example, salaried employees need to submit their salary slips, whereas Profit and Loss statements of the business are required for self-employed people.

Nowadays, with the vast penetration of the Internet to the nooks and corners of India, understanding the home loan process has become more comfortable. Moreover, you can use a home loan EMI calculator to plan your monthly instalments on the home loan amount you are availing. If you are planning to purchase a house with the help of a home loan, you will also need to pay the processing fees as detailed above and as per the rules of the home loan lenders

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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.