What Are the Costs You Need to Bear While Taking a Home Loan?

A home loan helps turn your dream into reality. But while most people focus on the loan amount and EMI (Equated Monthly Instalment), they often forget about the other costs involved in taking a home loan. These hidden or additional charges can add up, and it's important to understand them before you sign on the dotted line.

In this blog post, we’ll break down all the common costs a customer needs to bear while taking a home loan in simple terms.

1. Processing Fee

This is a one-time fee charged by the bank or lender for processing your home loan application. It typically ranges from 0.25% to 1% of the loan amount.

Example: If your loan amount is ₹50 lakhs and the processing fee is 0.5%, you’ll pay ₹25,000 as processing charges.

💡 Tip: Some lenders offer discounts or waive off this fee during special offers.

2. Legal and Technical Charges

Before approving the loan, banks verify the legal status of the property and assess its value. For this, they hire legal and technical experts — and the cost is passed on to you.

• Legal charges cover property document verification.

• Technical charges involve physical inspection and valuation of the property.

This fee can range from ₹2,000 to ₹10,000, depending on the lender and property location.

3. Stamp Duty and Registration Charges

While not part of the loan itself, these are government charges you must pay when registering the property in your name.

• Stamp duty varies by state (usually 4% to 7% of the property value).

• Registration charges are usually around 1%.

Note: These charges are not covered by your home loan and must be paid upfront.

4. MODT Charges (Memorandum of Deposit of Title Deed)

In many states, when you take a home loan, you must register a document called MODT with the local registrar. This document confirms that you’ve deposited your property’s title deeds with the bank.

• The MODT charge is usually 0.1% to 0.3% of the loan amount.

5. Prepayment/Foreclosure Charges

If you decide to repay your loan early, some lenders (especially for fixed-rate loans) may charge a prepayment or foreclosure fee.

• For floating-rate home loans, RBI guidelines usually prevent banks from charging this fee.

• For fixed-rate loans, the fee can be 2% to 5% of the outstanding amount.

6. Insurance Premium (Optional but Recommended)

Many lenders suggest (or insist) on taking:

• Home insurance – to cover damage to the property.

• Loan protection insurance – to cover loan repayment in case of death or job loss.

These premiums can be one-time or annual, depending on the policy.

7. GST on Charges

Keep in mind that 18% GST is applicable on most of the service charges like processing fees, legal fees, etc. This adds to the overall cost.

Conclusion

Taking a home loan is not just about the interest rate or EMI. It's equally important to understand the total cost of borrowing. Here’s a quick summary of the costs:

Cost Type Approximate Range Processing Fee0.25% – 1% of loan amount Legal & Technical Charges₹2,000 – ₹10,000Stamp Duty & Registration5% – 8% of property value (varies by state)MODT Charges0.1% – 0.3% of loan amount Prepayment/Foreclosure0% – 5% (depends on loan type)Insurance Optional (varies with policy)GST on Charges18% on applicable services

Being aware of these costs helps you plan better and avoid surprises later. Always ask your lender for a detailed home loan cost breakup before finalizing the loan.