Owning a home ranks high on the bucket list of most Indians. After all, a home gives you freedom and privacy, while also ensuring financial security. However, purchasing a home is also a substantial responsibility, not to mention one of the largest purchases one makes in their lifetime. If you are budgeting for your first home, here is a lowdown on some of the ‘other expenses’ that can have a big impact on your bottom-line.
WHEN YOU SEAL THE DEAL
As if the home-buying process isn’t overwhelming enough, there are several other charges associated with purchasing a home that could raise the overall price of the property. Do not not to overlook the below-mentioned charges:
Stamp duty and registration fee: This is a compulsory fee that the buyer is supposed to pay the state government to get the house registered under his/her name. These charges may differ from state to state (from five to seven per cent of the cost of the home), and the house won’t be registered in your name unless the stamp duty is paid. Registration is the full and final legal agreement between the buyer and seller indicating a change of ownership, and the court charges a registration fee for this service, which is generally around one-two per cent.
New furnishings: Will you need to purchase new furniture, appliances, window coverings or other items for the home? Make sure to account for these in your budgeting process.
Advance amenities fee: The builder may ask buyers to pay the maintenance fee in advance for a time period, mostly upto a year. The figure isn’t usually cited in the cost, but it does make up the final bargain. It includes charges for having security guards in the society and maintenance of roads, parks and lawns, and lighting fixtures within the housing society. It can also include club membership. Be aware of all these before you go ahead and foot the final bill.
Parking charges: Although parking is indeed a much-needed amenity, the space for parking comes at a cost. Depending on the size of the available parking space, the fee can vary.
Therefore, the wise thing to do is to keep the parking cost into consideration while purchasing a property.
When shopping for a new home, pay attention to the GST charges. If you are buying an under-construction property, then you would be liable to pay five per cent GST on the value of the house, and if you are buying an affordable house, one per cent GST will be applicable. However, no GST is applicable for ready to sale properties if Completion Certificate has been issued.
If you have sought help from a registered broker, you will have to shell out a brokerage fee, which can be up to one-two per cent of the property value (plus applicable GST). Besides, if you hire professional movers and packers when moving homes, you will have to make a one-time payment, which will depend on the items being moved and the distance, so make sure you factor it in. The builder also charges a floor rise fee linked to the floor on which you are buying the property. These are charged by builders separately and are not a part of home costs. To determine the legal ownership of a property and the liens or judgments that may be attached to the property, a title search is performed by a third party, which is commissioned by the bank. As the buyer, you have to bear that cost.
CHARGES LEVIED ON HOME LOANS
While a home loan helps a buyer realise their home-buying dream, there are many costs, which are a part of the fine print that can come as an unpleasant surprise. Here are some charges, which are often overlooked by borrowers:
Application charge: This fee is collected towards the processing of your loan application. This fee is collected upfront irrespective of whether your loan is sanctioned or not. The application fee (approx. in the range of Rs 2000-10,000) amount is non-refundable.
Processing charge: This fee has to be paid upfront along with the loan application. The processing fee is non-refundable. However, many banks offer the option of paying a part of this fee along with the loan application and clear the balance fee before disbursal of the loan. Depending on the organisation, this fee can be either a flat fee or a percentage of the loan.
Prepayment penalty: When a borrower pays the entire or a part of the outstanding loan before the due date, it is termed as prepayment. Prepayment clauses vary across lenders, and often from loan to loan. Home loans with floating interest rates do not have a prepayment penalty; however, there may be restrictions regarding the number of times prepayments can be made in a year and the minimum amount that can be prepaid at a time.
Commitment fee: Some institutions levy a commitment fee in case the loan is not availed within a stipulated period after it is processed and sanctioned. This fee is typically charged as a percentage of the difference between the amount sanctioned and the amount disbursed. In the case of a construction-linked loan, the loan disbursal is linked to project completion stages. The borrower may need to pay a charge for accessing the loan in the future from the lender.
Mortgage deed fee: Some banks may insist on the registration of the mortgage deed and recover the costs for the same as the mortgage deed fee. It is generally a percentage of the home loan and forms a major chunk of the total fee amount you need to pay for availing the loan. Some institutions may waive off this charge to make the home loan product more attractive.