What Are The Different Charges Applicable On Land Mortgage Loans?

Land mortgage loans are one of the most important products offered by financial institutions for purchasing land. However, there are several charges and fees that might be attached to the loan. In this article, we’ll uncover different charges that you might be unaware of while taking a land mortgage loan.

1. Processing fee

There are protocols the lender must follow while processing a mortgage loan application. Depending on the financial institution, the processing fee may be a set sum or a percentage of the total loan. Loan approval is contingent on factors other than payment of the processing fee. In addition, this cost is non-refundable if the loan application is denied.

2. Registration charges and stamp duty

When you purchase a home, it is important to register the sale deed with the sub-registrar. A Memorandum of Deposit of title deed (MODT) is executed to validate the arrangement between the lender and the borrower. This document comes with stamp duty and registration charges, which vary from state to state. Paying the stamp duty and registration charges is essential for smooth Land Loan processing.

3. Documentation charges

Borrowers must also pay documentation charges to the lending institution. It is a fee charged for preparing the documents related to the Land Loan. This includes the loan application, sanction letter, and other documents that must be signed. 

4. Land Loan tenure charges

If you need to adjust your Land Loan repayment tenure due to financial difficulties, you may face a fee from the bank. This can include lengthening the tenure if you cannot pay the EMI or reducing the tenure if your financial position has improved. It is important to know that the bank will charge a fee for any changes to the loan repayment plan. 

Also Read: Use An EMI Calculator To Estimate Your Monthly Mortgage Payments

5. Loan conversion fee

Loan borrowers must pay a loan conversion fee to their bank to convert a current loan to one linked to the new repo rate benchmark. Borrowers pay the loan conversion fee to facilitate linking their existing loans to the new repo rate benchmark. Borrowers under the former MCLR regime and those under the base rate system will be subject to this charge.

6. Prepayment charges

Borrowers with a fixed interest rate have to bear the brunt of prepayment charges if they are willing to repay the loan before the end of the repayment tenure. Banks levy a certain percentage of the outstanding loan amount as a penalty. 

Conclusion

When it comes to loan against property interest rate, borrowers should be aware of the various charges that they may incur. These charges typically include processing fees, prepayment charges, late payment fees, and foreclosure charges, among others. It is important to carefully read and understand the loan agreement and associated documents to avoid any surprises and ensure that you are aware of the total cost of borrowing. By being aware of these charges and planning accordingly, you can make informed decisions and manage your loan repayments more effectively.