Home Loan Processing Fees and Charges

Thinking about getting a home loan? Well, there’s a little more to it than just comparing interest rates. One of the first costs you'll encounter is the home loan processing fee. The processing fee is an upfront fee you have to pay to the bank at the time of loan disbursal. It might seem just like another line item, but it’s actually crucial to your loan—kind of like paying for a quality inspection when you buy a house. So, why not take a closer look at what this fee really includes and how it affects your overall loan experience? Let’s dive in and clear up some common misconceptions to help you save money and make smarter choices.

What is a Home Loan Processing Fee?

A home loan processing fee is a one-time upfront fee that includes an administrative charge that financial institutions and banks levy when you apply for a home loan. It’s the cost for the bank or financial institution to process your loan application, from reviewing your financial documents to conducting credit checks. The processing fee is deducted from the home loan amount at the time of disbursal. 

For example, if you’re eligible to receive a loan amount of ₹20 lakh and the processing fee is ₹3,000, the final disbursed amount would This fee is crucial for the financial institution as it covers the operational expenses incurred during the loan approval process.

Why is processing fee charged? Well, processing a home loan requires considerable effort and resources. Financial institutions need to verify your income, evaluate your credit history, and assess the property you intend to buy. This involves multiple departments within the bank and sometimes even external agencies. The processing fee helps the financial institution offset the costs associated with these activities.

Additionally, this fee is typically non-refundable, even if your loan application is not approved, so it's a good idea to ask about the processing fee upfront when shopping for loans.

Types of Home Loan Processing Fees and Charges

To give you a clear understanding of the various expenses associated with securing a home loan from Ujjivan Small Finance Bank, here's a breakdown of common fees and charges:

Legal Charges on Home Loan

Legal charges on a home loan encompass the fees associated with the legal scrutiny of the property documents involved in the loan transaction. These charges cover the cost of ensuring that the property is legally clear of any encumbrances and that there are no legal hurdles that could affect the ownership or sale of the property.

This process is crucial as it verifies the legitimacy of the property's title, checks for liens, and ensures compliance with local real estate laws.

For Ujjivan SFB, the legal charges are included under the CLADUM charges (Credit, Legal, Administrative, Documentation, Upkeep, and Maintenance). The rate for these combined services ranges from 0.75% to 2% of the loan amount plus GST, depending on the specific loan product and scheme.

Standard Charges for All Home Loans

Standard charges for all home loans include a variety of fees that are generally applicable to every loan product, regardless of the specific terms or borrower's circumstances.

• Processing Fee: Ujjivan SFB charges a processing fee of ₹3350 plus GST, which is applicable to different loan types, covering the cost of evaluating and processing the loan application.
• Part-payment Charges: There are no charges for part-payment on home loans, allowing borrowers flexibility in repaying their loans faster without incurring additional costs.
• Late Payment and Bounce Charges: Charges for late payments or cheque bounces are set at ₹500 plus GST per instance. These fees compensate the bank for the additional handling required due to delayed or failed payments.
• Foreclosure Charges: Depending on the type of interest rate (fixed or floating), foreclosure charges are fixed at 3% of the outstanding loan amount in the case of loan transfer. However, there are nil charges if the loan foreclosure happens with the borrower's own funds.