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Processing Fee For Home Loan

IndianMoney.com Research Team | Posted On Wednesday, January 09,2019, 05:59 PM

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Processing Fee For Home Loan

 

 

What is home loan processing fee?

Home Loan processing fee is a fee charged by home loan lenders like banks and housing finance Companies from applicants, when they receive home loan application. The fee charged is used to cover administrative expenses while processing the home loan application. Most home loan lenders charge processing fee on home loan applications. There are a few lenders who offer home loans at Zero Processing Fees.

Processing Fee For Home Loan

RBI Rules of Home Loan Prepayment

Banks and NBFCs are not allowed to charge prepayment penalties in the following cases as per RBI guidelines:

  • If the loan is offered on floating interest rate: As per the RBI guidelines, Banks and NBFCs are not allowed to charge any prepayment fees and penalties if the loan is offered on floating interest rate. No prepayment charges to be levied on either part prepayment or full prepayment.
  • Fixed Rate Home Loan from NBFCs, provided the prepayment is from own sources: NBFCs are not allowed to charge prepayment penalties on fixed rate home loan availed by borrowers, if the borrowers repay from their own sources and not by borrowing from another lender.
  • Dual Rate Home Loan from Banks or NBFCs: If the prepayment is made when the loan has been shifted to variable rate home loan and has become a floating rate loan.

Banks and HFCs are allowed to levy prepayment penalties in the following cases:

  • Home Loan taken by firms / companies / organizations: Home loans borrowed by a company / firm / organization are not exempted from prepayment or foreclosure charges irrespective of whether the home loan is availed at a floating rate loan or fixed rate loan or dual rate loan. Banks and NBFCs can levy a prepayment penalty as specified on the loan agreement.
  • Fixed Rate Home Loans availed from banks: Banks are allowed to charge prepayment penalties on fixed rate home loans. The penalty charge will be as per the signed loan agreement between lender and borrower.
  • Fixed Rate Home Loans taken from NBFCs: NBFCs are allowed to charge prepayment penalties on fixed rate home loans, when borrowers foreclose the loan by home loan balance transfer option.
  • Dual Rate Home Loans by individuals: Dual Rate home loan scheme is a home loan scheme in which the rate of interest is fixed for a certain period and becomes variable post that. In dual rate home loan scheme, banks are permitted by RBI to charge prepayment penalties if the loan is repaid during the period when the interest rate is a fixed rate. However, once the loan becomes a floating rate loan, the banks are not permitted to charge any prepayment penalties as per RBI guidelines.

Compare Processing Charges on Home Loan 2019

Home loan processing fee is usually charged as a certain percentage on the loan amount applied. Lenders have capping on maximum fee payable as a processing fee. Most lenders charge a maximum of Rs 10,000 as processing fee. The table below shows the processing fee of popular lenders in 2019:

Bank

Processing Fee as a % of loan amount

Minimum and Maximum processing fees

SBI Home Loan

0.50%

Min Rs. 10,000 - Max Rs. 10,000

HDFC Home Loan

0.50%

Min Rs. 3,000 - Max Rs. 10,000

ICICI Bank Home Loan

0.50%

Min Rs. 5,000 - Max Rs. 5,000

Axis Bank

0.50%

Min Rs. 1,000 - Max Rs. 25,000

PNB Housing Finance

1.00%

Min Rs. 10,000 - Max Rs. 10,000

Bank of Baroda

0.50%

Min Rs. 7,500 - Max Rs. 20,000

LIC Housing Finance

0.50%

-

Indiabulls

-

Min Rs. 1,000 - Max Rs. 5,000

Citibank

-

Min Rs. 10,000 - Max Rs. 10,000

DBS Bank

-

Max Rs. 10,000

DHFL

0.50%

Min Rs. 2,500 - Max Rs. 20,000

Kotak Bank

-

Max Rs. 10,000

Indian Overseas Bank

0.53%

Min Rs. 8,900 - Max Rs. 13,350

HSBC Bank

1.00%

Max Rs. 10,000

Edelweiss

0.25%

-

DCB Bank

2.00%

Min Rs. 5,000

Corporation Bank

0.50%

Min Rs. 1,000 - Max Rs. 50,000

Yes Bank

0.75%

Max Rs. 10,000

Bank of Maharashtra

0.50%

-

LT Housing Finance

2.00%

Min Rs. 4,999

Andhra Bank

0.50%

Max Rs. 10,000

Union Bank of India

0.50%

Max Rs. 15,000

Standard Chartered Bank

1.00%

Min Rs. 5,000 - Max Rs. 10,000

South Indian Bank

1.00%

Max Rs. 10,000

PNB

0.50%

Min Rs. 20,000 - Max Rs. 50,000

Punjab and Sind Bank

0.25%

Min Rs. 1,000 - Max Rs. 15,000

Lakshmi Vilas Bank

0.40%

Min Rs. 10,000 - Max Rs. 20,000

Karnataka Bank

0.25%

Min Rs. 250

Indian Bank

0.23%

Max Rs. 20,381

GIC Housing Finance

-

Min Rs. 2,500

Dena Bank

0.50%

-

Central Bank of India

0.50%

Max Rs. 20,000

IIFL

1.00%

Max Rs. 10,000

Bank of India

0.25%

Min Rs. 1,000 - Max Rs. 20,000

Vijaya Bank

0.50%

Min Rs. 1,000 - Max Rs. 20,000

Allahabad Bank

0.40%

Max Rs. 50,000

UCO Bank

0.50%

Min Rs. 1,500 - Max Rs. 15,000

Reliance Capital

1.00%

Min Rs. 3,000 - Max Rs. 6,500

OBC

0.50%

Max Rs. 20,000

Jammu And Kashmir Bank

0.25%

Min Rs. 500 - Max Rs. 10,000

IDBI Bank

0.50%

Min Rs. 2,500

Federal Bank

0.50%

Min Rs. 3,000 - Max Rs. 7,500

Dhan Laxmi Bank

1.00%

Min Rs. 10,000

Tata Capital

0.50%

-

Canara Bank

0.50%

Min Rs. 1,500 - Max Rs. 10,000

IDFC Bank

-

Min Rs. 5,000 - Max Rs. 5,000

United Bank of India

0.59%

Min Rs. 1,180 - Max Rs. 11,800

Syndicate Bank

0.13%

Min Rs. 500 - Max Rs. 5,000

RBL Bank

-

Min Rs. 5,000 - Max Rs. 15,000

Karur Vysya Bank

-

Min Rs. 5,000

 

What is Processing Fee?

Processing fee is a fee collected for all loan application processing related works done by a prospective lender/bank. Processing fee is collected at the time of Home Loan application. It is charged as a certain percentage of the loan amount.

Want to know more on Home Loans? We at IndianMoney.com will make it easy for you. Just give us a missed call on 022 6181 6111 to explore our unique Free Advisory Service. IndianMoney.com is not a seller of any financial products. We only provide FREE financial advice/education to ensure that you are not misguided while buying any kind of financial products.

SEE ALSO: All You Need To Know About Home Loan Down Payment And EMI

Processing Fee For Home Loan

Home Loan Processing Fee

Home Loan Processing Fee differs across lenders. Usually, Home Loan Processing Fee is charged at 0.5-1% of the loan amount.

The table shown below gives the Home Loan Processing Fee charged by different banks and financial institutions.

Home Loan at Zero Processing Fees: Generally, all lenders charge Processing Fee for Home Loan which is usually 0.5% to 1% of the loan amount. There are instances where a lender waives the entire processing fee. Applicants with good Cibil score are charged zero processing fees. This is because the applicants have a proven track record of repayments and all lenders would be ready to lend to them, which gives the applicants a wide range of lenders to choose from.

To attract applicants with good Cibil score, the lenders offer waiver on processing fees. Recently, SBI was offering loans at zero processing fee for both first time home buyers and those who want to transfer their loan balance. This practice ended in March 2018.

SEE ALSO: Term Insurance for Home Loan

Apply Home Loan Online:

There are two modes of application process for Home Loan. For offline application, you must visit the lenders nearest branch to manually fill out and submit the application form in person. Home Loan application can be made online on the lenders’ website.

For offline application, you must visit the bank branch for furnishing all the required documents. In online application, the lender would send an executive to your house that would assist with your home loan application. All home loan related documentation happens at your house, which is convenient.

Home loan eligibility:

Lenders have set their own eligibility criteria to sanction loans. It is a must for the applicants to meet all the eligibility criteria in order to obtain a loan. Below mentioned are the general criteria to avail Home Loans in India.

  • The applicant must be a Resident Indian Citizen.
  • The applicant must be at least 21 years old.
  • The applicant must possess PAN Card.
  • The applicant must furnish a document for Identity and Address Proof.
  • The applicant must have a stable income.
  • The applicant should have a good credit score. Check Credit score for free at IndianMoney.com.
  • If the applicant is self employed, he/she must have stable income for at least 3 years.

SEE ALSO: Things To Complete when You Close Home Loan

EMI on Home Loan

Home Loans are repaid through Equated Monthly Installments or EMIs. EMIs are of two portions: Principal and Interest. So by paying EMI, you make payment towards both principal and interest simultaneously.

EMIs are paid each month, throughout the loan tenure. The EMIs paid over the first few years contain higher proportion of interest. It is advisable to make pre-payments within the first three years, as this would bring down the loan tenure considerably and saves interest.  

Tax Benefit on Home Loan

Availing home loans offer tax benefits. If Home Loan is availed along with a co-applicant, then the co-applicant also gets the same tax benefits that the main applicant gets in the proportion of repayment. Below mentioned are the tax benefits that home loan borrowers get under the Income Tax Act:

i) Tax Deduction on Paying Interest as Per Section 24: Home Loan borrowers are given a tax deduction of up to Rs 2 Lakhs a year, on paying interest for a self-occupied house. For let-out property, the entire interest on home loan is entitled for tax deductions without upper limit. Tax deduction of up to Rs 30,000 a year is given for borrowers of home reconstruction loans.

ii) Tax Deductions On Repaying Principal As Per Section 80C: Repayment of home loan principal gives tax deduction up to Rs 1,50,000 a year.  If the house is sold within five years, then the tax benefits are reversed. The tax savings would be added to current year’s income and taxed as per income tax slab.

iii) Tax Deductions For First Time Home-Buyers As Per Section 80EE: First time home-buyers are entitled to get additional tax deduction of Rs 50,000 a year on home loan interest, subjected to meeting certain conditions.

Home Loan Balance Transfer

Home Loan Balance Transfer is a good option if you find a lender with better loan terms and charging lower interest than your current lender. Application process for Home Loan Balance Transfer is almost the same as for a fresh Home Loan. You need to provide a few extra documents (like NOC from the current lender), to the new lender to avail Home Loan Balance Transfer.

Frequently Asked Questions

Q. Will the bank refund processing fees, if my loan application gets rejected?

A. Amount paid towards processing fee of home loan application is not refundable, even when the bank rejects the application.

Q. What is the lowest processing fee on home loan?

A. Few lenders don’t charge processing fees. Hence zero is the lowest processing fee on home loan. To enjoy this benefit, you need to have a good credit score.

Q. What are the other home loan charges in addition to processing fees?

A. Other charges on home loans apart from processing fee are administrative charges, swap charges, prepayment and foreclosure charges and late payment charges.

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