SBI’s home loan processing fees are back. What does this mean for borrowers


BL Research Office

SBI recently removed the home loan processing fee waiver, which until now was part of its festive offer. While the SBI and other banks have courted borrowers with attractive lending rates – launching repo-linked home loans this holiday season – the sudden removal of the processing fee waiver could hurt your festivities.

According to reports and an internal circular, SBI had waived processing fees on mortgage loans taken out until December 31, 2019, as part of its festive offer. But as of October 15, that relief was withdrawn, meaning borrowers will have to shell out a net amount as a processing fee when taking out a home loan.

So how much of a hole is burning in your pocket? We look at the processing fees charged by various banks to find out.

Processing fee

Home loan processing fees are one-time charges taken by a bank for processing your loan. It is charged to cover the cost of completing the formalities related to the loan, including the expenses incurred for documentation and credit assessment and verification. Often, banks waive these fees to attract borrowers. Usually, banks go all the way to come up with attractive offers during the holiday season which include cheaper loan rates, zero processing fees, repayment offers, higher eligibility amount than habit, etc.

While the processing fee may seem small — compared to the home loan amount – it is nonetheless a net sum that cannot be ignored.

For example, according to the SBI website, the bank charges 0.35% of the loan amount as a processing fee. Fees can range from a minimum of 2,000 to a maximum of 10,000 (excluding tax). In addition, expenses for an appraisal report, registration with CERSAI are collected separately from the borrower. This would mean that you might have to shell out a considerable amount to take out a home loan, in addition to the processing fees.

Other players such as HDFC charge 0.5 percent of the loan amount (maximum 10,000 plus tax) as a processing fee.

In some cases, processing fees with banks and other financial institutions can go up to 2 percent or more — with no cap on maximum fees. For example, ICICI Bank charges 0.25 percent of the loan amount plus applicable taxes. This means that you may have to pay higher processing fees for a high value home loan / purchase. Kotak Bank charges a maximum of 2 percent of the loan amount as a processing fee. This implies an outflow of ₹ 1.2 lakh for a home loan of ₹ 60 lakh.

In most cases, the processing fee is non-refundable, even if the desired loan amount is not sanctioned. Therefore, it is best to do a comparison between financial institutions and their processing fee policies before applying for a loan. While loan rates are paramount when making a decision, processing fees can also be a big expense to consider.

Even though credit institutions offer a limited time offer with no processing fees, the benefit may be outweighed by other fees such as legal fees or documentation fees.

Other expenses

Lenders charge other fees for home loans, such as document fees, legal fees, administration fees, and other legal levies. Additionally, financial institutions may charge additional fees even after you take out a loan – for rescheduling loan payment, EMI date change, etc.,

So, in addition to loan rates and loan term, also keep track of other fees while taking out a loan.

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