Navigating Fees and Charges on Property Loan

A loan against property is one of the secured forms of finance. With this type of mortgage loan, individuals pledge their property as a mortgage in return for a loan amount. However, individuals must know the fees and charges on property loans before agreeing to a lender’s terms and conditions. Individuals can go through this article to understand the various charges involved with property loans.

Understanding different charges and fees on property loans

When an individual applies for a property loan, they must know the various fees they must pay. Here are some fees involved with property loans that applicants need to pay:

• Property loan processing fee

When applying for a property loan, applicants must pay a one-time fee for processing the loan application. This fee is non-refundable, which means applicants will not get the amount back if their loan application gets rejected. After fulfilling the loan against property eligibility criteria, individuals must pay this processing fee before their loan is disbursed.

• Legal charges

If an applicant applies for a property loan, they must know that the lender will do a property verification to ensure it is free from any legal dispute. They will also verify all submitted documents and visit the site for inspection. Hence, lenders seek compensation to hire a lawyer for verification purposes.

• Interest rate

The property loan interest rate is usually higher than home loans. When an individual applies for a loan against property, their interest rate will depend on the loan amount and tenor. However, factors like credit score and LTV ratio also affect LAP interest rates. Lenders also allow applicants to choose between floating and fixed interest rates depending on their preference. 

• Foreclosure charges

If a borrower pays their entire loan amount before the tenor ends, the lender imposes foreclosure charges. Applicants must choose a lender who imposes low foreclosure charges upon full repayment of the amount before its tenor.

• Part-payment charges

A part-payment charge is similar to a foreclosure charge. However, the part-payment charge is levied on a borrower when they make a part payment of the outstanding loan balance over the scheduled EMI payments. 

• Penal interest or late fee

Borrowers must pay a late fee or penal interest if they miss their Equated Monthly Instalment (EMI) payment. The late fee also affects an individual’s creditworthiness, lowering their credit score and reducing their chance of getting another loan in the future.

• Statement charges

Certain financial organisations may ask borrowers to pay for the loan statement charges if the individuals ask the lending organisations to provide them with such documents.

• EMI bounce charges

If an individual fails to pay monthly instalments to the financial organisation due to insufficient funds or other technical issues, they will need to pay a charge for it. The lending organisation will impose an EMI bounce charge on the borrower, and the amount varies from one lender to another.

• Secure fees

Some lending organisations charge this fee to enhance the security of a borrower’s loan account. As most financial lenders allow borrowers to manage their loan accounts online, they charge a secure fee to protect the sensitive information of the borrower. 

Borrowers applying for a property loan should be aware of the different pre-approved loan offers available in the market. Lenders offer these for home loans, loans against property, etc. To check one’s eligibility for a pre-approved offer, simply enter the required details on the lender’s website. 

Calculation of monthly instalments for property loan

Individuals applying for a property loan must know how to calculate the monthly instalments. It will help them to manage their finances accordingly and make part payments whenever possible. Here is the formula to calculate the monthly instalments:

EMI = P x R x (1 + R)^N / (1 + R)^N – 1

Where P is the principal amount, R is the interest rate, and N is the loan tenor. 

However, individuals can use a property loan EMI calculator online to calculate the monthly instalments easily and accurately. 

When applying for a property loan, one must be aware of various fees and charges on property loans. It will help them compare different financial lenders and choose the one that suits their requirements. In addition, it will help them know the total amount they must pay when applying for a property loan.