Cost of Home Loan in India – All Expenses listed

Anil Gupta  26 Apr, 18      9  Finance

Cost of home loan is the price that you have to pay to bank to process your loan. There are some un-common fees that may surprise you when you are ready to sign the papers.

Home Loan Processing fees

Charged as a percentage of total home loan amount and varies from 0.25 to 1%, is the most common and prominent fees talked about when applying for home loan.

This non-refundable (pay irrespective of whether your loan gets sanctioned or not) fees has to be paid at the time of application.

Bank takes it to pay for the services, that it uses, to verify your documents.

Sometimes, banks do charge a flat processing fees for loans under 20 lakhs and another fixed amount above 20 lakhs of amount.

It may also happen that you apply for a loan of INR 21,00,000 and pay a processing fees of INR 5250 @ of 0.25% and after all the processing, the final loan approved amount is INR 19,00,000.

In this case, the bank is supposed to return the excess amount that you had paid earlier i.e. INR 500 (5250-4750).

Home Loan Legal adviser fees

Fees to get the property’s papers verified and scrutinized by a legal advisory or a lawyer.

A lawyer will check the past records to verify the title (ownership chain) of the property, which will form the basis of bank’s decision.

This fees is also non-refundable and needs to be paid with the loan application itself.

If the property you are buying is part of a project that is already pre-approved by the bank, this fees is generally low i.e. approximately INR 1,000.

The reason: Bank would have already verified the project’s document at project level.

If the property is an individual one, who’s records are already not available with the bank, then you may need to shell out approximately INR 3,000 for full verification.

GST tax on all bank fees

GST (earlier Service tax) is another amount that’s charged by banks on the amount that you pay them as fees. All fees are topped up by service tax which currently is 18%.

Stamp paper cost

This is a nominal expense of about INR 300 to buy legal stamp papers and write down legal home loan agreement between you and bank. Bank will ask you to buy these papers as they do NOT include this amount in processing fees.

This expense need to be made ONLY when your loan has been sanctioned and approved by bank.

Cost of Home insurance premium

Insuring your home is a good option but not mandatory if you DON’T take a home loan. But if you do, it is mandatory.

This cost needs to be borne by you, which falls in the range of approximately 0.1-0.2% of home value (INR 8,ooo for a property worth 40 lakhs).

The insurance amount is required to be paid upfront after the loan approval and first disbursement by bank. The home has to be insured against any natural calamity and other threats which can potentially destroy your property.

Cost of Home LOAN insurance premium

Home loan insurance is different than home insurance in the sense that the first one insures you against the home loan liability and home insurance insures your property.

Home loan insurance can also act as your guarantor in case your credit report is NOT good and bank wants you to provide a guarantee to support your home loan.

This is a big expense if you opt-in for it. You may need to shell out approximately INR 65,000 upfront towards home loan insurance premium for a loan of about 20 lakhs for a tenure of 25 years.

The premium amount varies according to your loan tenure i.e. less premium for less tenure and vice-versa.

Cost of taking home loan in India - Expenses and Fees That you need to pay
Cost of taking home loan in India – Expenses and Fees That you need to pay

Home Loan Costing Example

Let us consider an example and then find out the approximate cost of taking a home loan:

Property Cost40 Lakhs
Home loan20 Lakhs, 25 years
Processing Fees0.5%
Guarantor RequiredYES
Home Loan Insurance TakenYES
Project already approved by BankYES
ExpenseAmount (Rs.) (Approx.)Time of payment
Processing fees10,000At the time of Loan application
Legal advisor fees1,000At the time of Loan application
Service tax on all bank fees1,360At the time of Loan application
Stamp paper cost300After Loan has been santioned by bank
Cost of Home insurance premium8,000After Loan has been santioned by bank
Home LOAN insurance premium65,000After Loan has been santioned by bank
Total Cost Of Taking Home Loan85,660

So, you may need to shell out EXTRA 85,000 upfront to get a finance of 20 lakhs and it is a huge sum for a middle class family seeking a home loan.

The costs mentioned above are generally not clearly communicated when you are searching for a home loan. You will only get to hear about the processing fees most of the time.

The home loan insurance cost is a huge cost if you plan to go for it and if your bank requires you to have a GUARANTOR. If you don’t have anybody to back you up, you will have no other option but to buy this insurance.

The cost for home loan insurance which i have considered here is for a loan of 25 years. If it is about 7 years, the premium amount would come down to INR 20,000 from INR 65,000. So, you can reduce your tenure to save some money here.

The aim of this article was to throw light on various expenses which you HAVE to make even though you may have not incurred them if you had not taken a home loan. I hope it helps you in planning before staring your home loan process.

   Read all 9 Q & A

  1. we need pay money bribe in regitration office and bank officials for approving the loan. you must add it because it cant be avaoidable

  2. sir, i want to purchase a home in city- Neemuch (m.p.) having cost 19lack i am saleride employee and eligible for 16lakh as per SBI, but there are some disputes that bank will give me loan as per price decided by municiple corporation and my eligibility reduced , now please suggest what can i do for 16lakh loan will any other bank will give me loan

    • Anil Gupta   29 Jan, 13 at 1:24 pm

      Hi Shreyas,
      Almost all banks follow the same norms. So, it will be difficult to say if any other bank will increase your eligibility or not. This is because, the municipal value of the home is the only way of finding the actual value of the house in the area.
      And yes, you will also not like to do the home registry on the market value as you will have to pay the stamp duty on the declared value.

      If you can show the total deal value on paper i.e. the market value and pay the stamp duty, bank will certainly pay you the loan as per the market value.

      Let me know if you need more information.

  3. Hi Soan…Really appreciate your effort to provide this information. Today I have been asked to pay stamp duty of Rs10500 for a property in Noida costing 72lacs. Loan amount i applied was for 50lacs from a govt bank and they are saying that processing fees is NIL. Do you think this charge is valid??

    • Anil Gupta   15 Oct, 12 at 8:48 pm

      Stamp duty of 10,500 looks to be too low. It should be somewhere around 6% of the property’s registration value.
      Also, stamp duty is not required to be paid unless you are registering the property on your name and getting the possession.
      Let me know if i understood your question correctly or not.

  4. im searching for a home loan and i hope this article helps me …. i will be back with my results.thx

    • Anil Gupta   2 Aug, 11 at 11:30 am

      Hi Sagar,

      I hope it helps you in evaluating the costs and take a wise decision.


      • Bank is requesting the customer to buy Stamp paper for 0.5% of the Loan sanctioned.As per your example it Rs10,000 and not 300INR

        • Anil Gupta   10 Oct, 12 at 9:15 am

          This is strange. Stamp paper for .5% is really too much. I have not heard about it earlier.
          I think bank must be asking for its own processing fee @0.5% of loan amount. Just double check with bank.