Buying a home is a major financial milestone for most Indians. However, many borrowers focus only on the interest rate. Consequently, they overlook the hidden charges associated with home loan products. These extra costs can add up to lakhs of rupees over time.
Therefore, you must identify every hidden charge on the home loan before signing your agreement. Read on to learn about the top 7 hidden details and how you can avoid being trapped in one.
1. Processing Fee Adds to the Hidden Charges on Home Loan
Lenders charge a home loan processing fee to handle your application. This fee covers the credit check and document verification process. Consequently, the processing fee on a home loan is usually non-refundable even if the bank rejects your application. Most banks charge between 0.25% and 1% of the total loan amount.
Therefore, a ₹50 lakh loan could attract a fee of ₹50,000. Some banks cap this amount at a specific limit. Moreover, you must pay this fee upfront during the application stage. This initial cost often surprises many first-time buyers.
| Pro Tip: Always apply during festive seasons, such as Diwali or the New Year. Banks frequently waive the processing fee on home loans to attract new customers. |
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2. Legal Fees are a Common Hidden Charge
Banks must verify the property documents to ensure the title is clear. Consequently, they hire external lawyers and charge you for home loan legal charges. These experts ensure the property has no legal disputes or pending litigations. Therefore, you must pay these hidden charges on a home loan to secure your investment.
Additionally, the bank conducts a technical valuation of the property. This ensures the market value matches the loan amount requested. Consequently, you will see these listed as home loan documentation charges on your sanction letter. Banks rarely absorb these professional costs themselves.
| Pro Tip: Request a copy of the legal search report and the technical valuation. Since you pay the home loan legal charges, you have a right to see the findings. |
3. Stamp Duty Creates Hidden Charges on a Home Loan
State governments collect home loan stamp duty charges to register the property in your name. This cost varies between 4% and 8% of the property value, depending on the state. Consequently, it represents one of the largest additional charges on home loan. Therefore, you should calculate this amount early in your financial planning.
Furthermore, you must pay registration fees, which usually cost 1% of the property value. These are mandatory home loan charges that the bank does not include in the EMI. You must arrange these funds from your personal savings.
| Pro Tip: Check if your state offers a lower rate for women. Many Indian states reduce home loan stamp duty charges by 1% to 2% for female owners. |
4. Hidden Charges Because of NOI Fees
The full form is Notice of Intimation. You must pay notice of intimation charges to the government registrar. This document confirms that you have deposited the title deeds with the bank. Consequently, the registrar records this information in their database to prevent fraudulent sales.
Therefore, NOI charges on home loans are mandatory in many Indian states, like Maharashtra. If you fail to file this notice within 30 days, you may face heavy penalties. Consequently, these NOI charges on home loans are essential for a legal mortgage. Always verify if your lender includes this in the initial estimate.
| Pro Tip: Ensure your bank or lawyer files the NOI within the stipulated timeline. This prevents extra notice of intimation charges or legal hurdles later. |
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5. Paperwork Involves Additional Charges on Home Loan
Banks often levy home loan documentation charges for drafting the loan agreement. This includes the cost of stamp paper and administrative work. Consequently, these home loan agreement charges can vary significantly between private and public sector banks. Therefore, you must read the fine print in your offer letter carefully.
Additionally, some lenders charge for the Memorandum of Deposit of Title Deeds. This is a key part of the home loan charges structure in India. These administrative costs cover the physical storage of your original documents.
| Pro Tip: Ask for a consolidated list of all home loan administrative charges. This prevents the bank from adding small, unexpected fees to your account. |
6. Prepayment Rules Can Also Impact Home Loan Charges
If you pay off your loan early, you might face home loan foreclosure charges. However, the RBI has banned home loan prepayment charges for floating-rate loans. Consequently, this rule saves borrowers significant money when they have surplus funds. Therefore, you should check your loan type before making extra payments.
Fixed-rate loans still attract home loan prepayment charges in many cases. These fees typically range from 2% to 4% of the outstanding balance. Consequently, switching to a floating rate is often more economical. Most modern borrowers prefer floating rates to avoid these penalties.
| Pro Tip: Always choose a floating interest rate. This allows you to avoid home loan foreclosure charges entirely under current RBI guidelines. |
7. Insurance Adds to Hidden Charges on Home Loan
Some banks charge home loan administrative charges for ongoing services like annual statements. However, the highest hidden cost is often the bundled insurance policy. Lenders frequently insist on life or property insurance. Consequently, this adds to the additional charges on the home loan total.
While insurance protects your family, the bank’s policy might be expensive. Therefore, you should compare the premium with external providers. Consequently, these hidden charges on home loans can be managed with better research. You should ensure the policy covers the entire loan tenure.
| Pro Tip: You are not legally required to buy insurance from the lender. Compare external term plans to reduce your overall home loan charges. |
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Top lenders for hidden charges on home loans in 2026
Choosing the right bank helps you manage additional charges on a home loan. Consequently, you should compare the home loan processing fees across various institutions. Therefore, we have compiled a list of top lenders for 2026. These banks offer competitive rates and transparent home loan charges.
| Bank / Lender | Interest Rate Range (p.a.) | Processing Fee (Approx.) |
| State Bank of India (SBI) | 7.25% – 10.50% | 0.35% (Max ₹10,000 plus GST) |
| HDFC Bank | 7.90% to 13.20% | 0.50% or ₹3,000 (whichever is higher) |
| ICICI Bank | 8.65% – 9.90% | 0.50% – 2.00% of Loan Amount |
| Kotak Mahindra Bank | 7.70% – 7.99% | 0.50% – 1% (Often waived for salaried) |
| Bank of Baroda | 7.20% – 9.95% | 0.50% (up to ₹15k) for loans up to ₹50 lakhs 0.25% (up to ₹25k) for loans above ₹50 lakhs |
| Axis Bank | 8.35% – 9.35% | Up to 1.00% (Min ₹10,000) and an upfront fee of ₹5,000 + GST |
| Punjab National Bank (PNB) | 7.90% – 10.45% | 0.35% – 0.50% of the loan amount, with a minimum of ₹2,500 and a maximum of ₹15,000 (plus taxes) |
| Union Bank of India | 8.35% – 10.50% | zero processing fees or 0.50% of the loan amount, capped at ₹15,000, plus GST (based on ongoing offers) |
| Bajaj Housing Finance | 7.15% – 10.85% | 0.50% – 3% of Loan Amount |
| LIC Housing Finance | 7.15% – 8.50% | ₹10,000 – ₹15,000 (Slab-based) |
| Canara Bank | 8.50% – 10.65% | 0.50% (min. ₹1,500; max. ₹10,000) |
| IDFC FIRST Bank | 8.85% – 10.50% | Competitive (Profile-based) |
| Central Bank of India | 8.35% – 9.80% | Low (Often waived in festivals) |
| Federal Bank | 8.80% – 10.15% | 0.50% of Loan Amount |
Conclusion
Understanding the hidden charges on home loan products is essential for every buyer. These costs can significantly increase your total repayment amount over the years. Consequently, you must factor in all hidden charges on a home loan during your initial budget planning. Therefore, a well-informed borrower always saves more in the long run.
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