Processing fees for home loans

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.

Summary

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!!!

You can subscribe to our future articles here.
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Comments

  1. Sanjay Jain says

    I have applied for a home loan from a private Indian bank which was sanctioned and they deducted the processing fee but I have not taken any disbursement and in future I am not going to take the loan from the bank. Can I get the refund of my processing fee? Please advise

  2. says

    reliance finanace charged Rs2210/-on account of processing fees for home loan & did not approved loan/can we get back this money /whre we can make complaint/which is the regulating body for home loan companies

  3. Sandeep P says

    Hi,
    I have paid processing fees to HDFC bank which ehy deducted during the verification process,etc. but I am planning not to take home loan from them, in this case would they refund the processing fees, because when I gave them a cheque what they told is your processing fees is refundable incase you dont take the loan.

  4. Santosh says

    Hi,
    I have paid 15000 Rupees towards home loan processing fee to IDBI and they mentioned this processing fee in my loan sanction letter, so can I apply for tax saving??

    home construction was not completed yet.

  5. Preeti says

    I had applied for a home loan of Rs 10,00,000(ten lakhs) from citizen credit co-operative bank. The loan was sanctioned,but due to some personal reasons i cancelled the loan. In future I am not going to take the loan from the bank. I hd paid 23000 as processing fees + 5000 as LIC + 5000 for franking. Can I get the refund of my fees? how much ? Please advise.

  6. says

    ThoughI have been reading Income Tax law for about 3 decades, I noticed for the first time, after reading your article that the Income Tax Act does incorporate a definition for “Interest” under Sec.2(28A). A great job. Hope to read more such articles

  7. says

    i have a querry if the processing fee charged by a financial institution includes opening of the account and closing of the same. I have read some where that Supreme Court of India has ruled that the FIs can not charge precloser charges can you please help as I have fallen in debt net of luring loans and suffering a lot. i have found this site very useful and full of useful information so I am posting a hope.

  8. rbiswas says

    i had applied for hdfc homeloan. they pre-approved my loan bt later rejected my property. so when i asked for the proc fee refund, they said only 50% will be refunded. i didnt know that.. so i fought tooth n nail till i got back my 100% p/fee n all the docs. ive closed my application with hdfc & i promise i wont go to that bank ever again !

  9. shiv ram meena says

    I applied a home loan of Rs.1500000/- to hdfc. My application was incompleted but they has sanctioned loan and charged processing fee Rs 11084/-. Now I am not inerested in home loan .Will hdfc refund processing fee? if yes how much .

  10. Arjun says

    Dear SIr,

    Please i am planing to take loan for my vilage house. Can i get another house loan with tax benfit for another city.

  11. pawar says

    Dear Sir,

    I had applied for NRI Housing Loan of Rs.13.5 lack in IDBI Bank.

    I received loan sanction letter but it was not possible to provide all the documents as their list is too big and it was increasing.

    Since my loan sanction letter date is expired, bank asked me to provide many documents once again which was not possible for me practical and I decline the loan.

    Can i get back processing fees which i paid i.e. INR.15000/- from bank.

    What the RBI rule says.

    Thank you,

    Pawar

  12. manoj m. kondekar says

    sir,
    i need your valuable help in respect of following:
    1) whether a private finanance(in this case DHFL) is entitled to charge me more than 1.0% of proposed santion amount for processing fees?
    2) whether they are duty bound to give me bifurcation of processing fees in writing they charged for?
    3) if they have not sanctioned the home loan and not informed me in writing about the santion or refusal of home loan proposal, whether i am entitled for refund of processing fees?
    4) whether RBI supprots such practise?

    • Vinay says

      Hi Everybody,

      Same case with me. I had applied for a Home Loan with HDFC Bank and I was just a coapplicant and my wife being a primary applicant. HDFC Sales folks kept on saying that Loan will be approved and infact gave us Loan Account Generation number as well. Apart from 11000 processing fees which they had taken thru cheque, they also took 8000 in cash for various expenses. The very next day they came back and said that Loan has been disapproved due to CIBIL report.

      Now will they refund the Processing fees which they have taken 11000/- + 8000/- ?

      Please advice

      Regards
      Vinay

  13. satyapalsingh says

    Hi Everybody,

    I had applied for a Home Loan with HDFC Bank and I was just a coapplicant and my wife being a primary applicant. HDFC Sales Loan will not approved due to CIBIL report is creating the issue with me now will they refund the Processing fees which they have taken ?

    Please advice

  14. natarajan says

    Sir,I want to apply for a home loan for 30 lacs.What are the charges are collected by the banks other than interest.Which bank loan is cheaper.Can you guide me with a table of interest,other charges,preclosure facility etc.,
    natarajan

  15. Prahallad says

    When you say that the bank charges this Processing charges, can you please specify as what n all are included in this processing charges ?

    • says

      Hello Rudresh,

      Normally they wont provide any separate bill for the processing fees. That means, the amount is deducted from the actual loan amount and remaining only disbursed to you. But, the processing amount would be mentioned in the loan sanction letter.

      Thanks,
      Krishna

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