Home Building & Planning

Housing Loan Charges


Some banks insist that the house should be adequately insured or the borrower should take a life insurance policy where the sum assured is at least equal to the loan amount. Some offer free insurance to the borrower and the house. In case of unfortunate death of the borrower, his family is not affected financially because of the housing loan liability. The insurance amount is used to repay the loan amount. In case of any damage to the house by earthquake, fire, riots etc. the costs of repair or reconstruction are paid back to the borrower. This is usually in the nature of term insurance, and the premium involved is low. Many banks offer free term insurance for the tenure of the loan on the outstanding loan amount.

Administrative fee

Banks charge an administrative fee on the loan amount that has been approved. This is towards the cost incurred by the bank in evaluating the property, eligibilty of borrower etc.

Prepayment Charges

Banks charge a prepayment penalty if the borrower decides to prepay the loan in part or full before the end of the tenure. This is because this prepayment upsets the financial planning of the bank.

Processing Fee

Banks levy a fee as processing charge. This is payable at the time of submission of application for the home loan.

Also read,