In this article I will be writing about the processing fees involved in applying for the home loans. Customer has to be very careful while reading the instructions on home loans and this article will explore few of the important facts about the processing fees involved in the home loans. I would like to answer all the questions posted in the comments section. You can subscribe to our future articles here.
What is Processing Fees?
When you are applying for a home loan, the bank will charge you certain amount as the processing fees. That will be included in the total home loans amount. Normally the processing fees differs from each bank like 0.5% – 1.0%. Bank will use the processing fees to verify your documents and all the formalities to complete the loan processing.
This is generally a percentage of the loan amount. For example, say, an individual wants to take a home loan of Rs 1,000,000, then the processing fees charged will be 0.50% of the said amount, i.e. Rs 5,000.
Bargaining for a lower processing fees is also possible if the borrower has already got his loan approved from one HFC but decides to shift to another HFC for actual disbursal.
Tax Deduction for Processing Fees
Most people are not aware that processing fees submitted for the home loans is eligible for tax deduction. The only way out is to ask the bank to provide a certificate about the fees payable as being in respect of a home loan to make yourself eligible to claim this deduction. This deduction is coming under Section 2(28A) of the Income Tax Act
Will I get the processing fees back?
In some cases, for example you are applying for the loan of Rs.200000. The loan sanctioned is only for Rs.150000. In this case might be thinking of getting back your processing fees. But, this is depend on the bank’s rules and regulations. So, it is good idea to discuss upfront when you are applying for the home loans.
In this article I have written about the processing fees involved in applying for the home loans. There is some other services fees also involved in applying for a loan. I will be writing it in my future articles. If you have any doubts please post it in the comments section. Thank you for reading!!!