A Breakdown of the Fees and Charges for a Loan Against Property

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Applying for a loan is one of the easiest ways to fund your aspirations, dreams, and needs. In India, loans are as dynamic as you are.
For those that know the benefits of a loan against property or mortgage loan, know how easy and cost-effective a mortgage loan can be. However, for those who are new to the system, have many questions and often worry about the fees and charges of a loan against property.

Read on to find out the charges of a mortgage loan.

What is a Mortgage Loan?

A mortgage loan is a loan you may avail if you are salaried or self-employed, and own, or jointly own, a residential, a commercial, or an industrial property. You may also apply for a loan against property if you are the legal owner of a plot of land. Know all in one information about mortgage loan click here.
When you choose to apply for a mortgage loan, the lender will take a deep look into your financial profile, which includes credit score, monthly income, liabilities, and multiple other factors, before approving the loan. The lender will also evaluate the property you wish to mortgage and decide the loan amount, interest rate, repayment tenor, and monthly installments.

What are the Fees and Charges for a Loan Against Property?

Here are the charges that you should consider before applying for a mortgage loan:
1. Loan Processing Fee
Lenders generally charge a part-refundable loan processing fee to cover the costs of everything from loan documentation and property inspection to loan disbursal. The charge varies from lender to lender. Usually, the charge is 2% of the loan amount you wish to receive, plus GST.
2. Foreclosure or Part-Payment Charges
This charge will apply to you if you decide to close the loan account prematurely by paying in full or want to reduce the outstanding payment obligation by paying a part as a lump sum.
Generally, foreclosure charges for an individual borrower are different than the charges applicable for a non-individual borrower. Foreclosure charges also differ based on the fixed or floating rate of interest.
If you are an individual borrower with a floating interest mortgage loan, then no foreclosure charges would apply on you.
If, however, you are a non-individual borrower, then you might have to pay a 3% foreclosure charge.
A 3% foreclosure charge will also apply on you if you are an individual or non-individual borrower with a fixed loan against a property interest rate.
3. Account Statement Charges
Although most lenders allow you to access your loan account digitally for free, if you require a printed statement mailed to your address, then you might have to pay INR 200 plus GST.
4. Preclosure or Photocopy Charges
If you require a statement of loan preclosure or need a list or photocopy of original property documents, then you might have to pay a fee of INR 300 plus GST.
5. Conversion Charges
At present, the floating rate of interest is at their multi-year lows. This might prompt a borrower to switch from fixed to the floating rate of interest. The charges for such a switch would be 3% of the total outstanding amount.
6. Overdue Charges
If you are unable to repay the EMI on a particular month, then a charge of 2% on the overdue amount would apply on the subsequent month.
Conclusion
Other than the charges mentioned above, the lender might also charge you for recovery and legal expenses, if you default on the loan beyond the grace period as approved by the lender.

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