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According to experts, while taking a new loan while refinancing, there may be a processing fee of 0.5% to 2% on the total loan amount. For example, if you have taken a loan of Rs 20 lakh, then you may have to pay a processing charge of Rs 10,000 to Rs 40,000. However, some banks may also give discounts as part of promotional offers, but these discounts are rarely available.
Technical and legal fees
The new bank or lender checks the condition of the property and the legal documents. There are two main types of fees for this:
Legal Fees: These fees are paid to the lawyer or legal team who investigates the ownership of the property. This charge can be between Rs 5,000 to Rs 15,000.
Technical Fee: This fee is for valuation of the property. This charge can range from Rs 3,000 to Rs 5,000.
Registration Fee and Stamp Duty
In some states, when refinancing, the existing loan agreement has to be re-stamped and registered. Stamp duty depends on the value of the property and can range from 3% to 7%. Additionally, registration fees can also range from ₹50,000 to 1%. This fee may be higher in some states, such as Himachal Pradesh where it can reach up to 8%.
repayment fee
If the interest rate on your existing home loan is fixed and you want to repay it early, you may have to pay a prepayment penalty. This penalty can range from 2% to 4% of the outstanding loan amount. However, prepayment penalty is not applicable on loans with floating interest rate, as RBI has banned it.
administrative expenses
The refinance process requires several documents, such as proof of identity, proof of income, property documents and current loan details. It costs time and money to collect these documents and complete the process. Some banks also charge administrative fees on this.
difference in interest rates
When refinancing, match the interest rates of the existing loan and the new loan. If you have a short term on your loan, consider whether refinancing with a lower interest rate makes sense.
impact on credit score
Whenever you apply for a loan, the lender checks your credit score. Checking your credit score frequently can affect it and make it difficult to get a loan in future.