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13 October 2010

Be Prepared for Other Hidden Costs before Taking a Home Loan


‘Other hidden costs’ are a term we all are familiar with. Many a times we go to purchase some good and we are made to pay ‘taxes extra’ an amount more than the printed price. Usually there is a small asterix below any advertisement which we do not pay much attention but during purchase it increases the price. The same matter happens with home loans. We see heavy discounts and low interest rates but we do not consider the hidden costs that we end up paying during taking a loan for purchasing a home. A home loan may be in simple terms amount borrowed by the borrower from the lender for a certain period of time with a certain amount of interest charged with the amount to be paid. As an individual comes up with the decision of taking a home loan one is usually not aware of other processing charges and this may lead to quite some amount if not prepared for. Also certain financial institutions may make the borrower open account in their bank with depositing a certain amount minimum or also the borrower may have to oblige by taking their shares which can be a pinch as the individual may not be prepared for this money.
Meaning of Joint Home Loans
It is always advisable to get thorough knowledge from different financial institutions and private brokers for their special requirements other than the interest rates before taking the step of applying for a home loan. 
1) Processing charge: This amount is taken by the bank for the application and other processing charges. It may vary for every institution but usually may be 0.5% till 1% of the loan amount.
2) Administrative fees: The different paper work and documents required as well as the stationary is added as a fee.
3) Legal charges: Some banks may also charge for legal verifications and visits from the verification teams. This may vary from different individual banks or private brokers.
4) Prepayment penalties: In case the borrower or individual that has taken the loan is willing to pay the amount prior to the set dates the bank loses on the amount earned as interest so they apply penalty charges for closure of the loan. Still the borrower is at benefit as this penalty fee is much lesser than the interest rate charged by the financial institution.
5) Delayed payment charges: Sometimes under unexpected circumstances the borrower may not be able to pay the monthly installment. Here for the next month amount as delayed payment is also charged with the amount. The percentage may vary for different lenders.
6) Cheque bounce charges: Penalty charges are levied in case of bouncing of cheque by the borrower.
Keeping in mind these important financial points helps the borrower to be prepared with this extra amount before applying for a home loan. Some private brokers may also charge transfer charges of flat to the borrower or purchaser of the flat.
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