The short answer
A home loan comes with one-time charges (processing fee, legal and valuation fees, stamp duty on the mortgage document, a CERSAI registration fee) and occasional ones (conversion or switching fees, charges for duplicate statements or document retrieval, and penal charges if you pay late). GST at 18 per cent applies to the lender's fees.
Since 1 October 2024, the lender must give you a Key Facts Statement (KFS) before you sign, showing the annual percentage rate (APR), which combines interest and all charges, and listing every fee. A charge not in the KFS cannot be levied later without your explicit consent. Compare lenders on APR.
Insurance is optional. Lenders often offer a loan protection or property insurance policy, sometimes with a single premium added to the loan. No RBI or IRDAI rule makes you buy it, and the lender cannot make buying a particular insurance product a condition of the loan. You can decline, or buy comparable cover elsewhere.
One-time charges
Processing fee: a percentage of the loan or a flat amount, sometimes with a cap, plus 18 per cent GST. Lenders set it, and it is often negotiable, especially for transfers or larger loans. Ask whether any part is refundable if the loan is not sanctioned.
Legal and technical (valuation) fees: for the lender's advocate and valuer. Some lenders include these in the processing fee; others charge separately.
Stamp duty on the mortgage: many states charge stamp duty on a memorandum of deposit of title deeds (MODT) or a mortgage deed, sometimes with a cap, and some require registration. The borrower usually pays. The rate and cap are set by the state, not the lender.
CERSAI registration: lenders register their security interest with the Central Registry, and may pass on a small fee.
Franking or stamp paper for the loan agreement, and courier or document handling fees: small, but they add up.
Charges during and at the end of the loan
Conversion or switching fee: for moving from one benchmark to another, or from floating to fixed or back, within the same lender. Under the Reserve Bank's 2023 reset framework, all switching charges must be disclosed in the sanction letter and on the lender's website.
Prepayment or foreclosure charges: none on a floating-rate home loan to an individual. A fixed-rate loan may carry a charge, which must be disclosed upfront under the Reserve Bank's 2025 prepayment directions.
Penal charges: under the Reserve Bank's circular of 18 August 2023 on fair lending practice, applied to fresh loans from 1 April 2024 (after the Reserve Bank deferred the original 1 January 2024 date) and to existing loans by 30 June 2024, lenders may levy a reasonable penal charge for non-compliance with loan terms such as late payment, but not penal interest added to the rate. Penal charges must not be capitalised, meaning no further interest is calculated on them, and their amount and reason must be disclosed in the loan agreement and KFS.
Statement, duplicate document and retrieval fees: for copies of statements, a list of documents, or taking out an original temporarily. Ask for the schedule of charges.
Cheque or mandate bounce charges: charged when an EMI payment fails. These are avoidable with a buffer in the account.
Insurance: optional, and what the rules say
Two kinds of cover are commonly offered with a home loan. Loan protection or credit life cover pays off some or all of the outstanding loan if the borrower dies (and sometimes on disability or job loss). Property insurance covers the building against fire, flood and other perils.
Neither the Reserve Bank nor IRDAI requires a borrower to buy life or loan protection cover to get a home loan. The RBI's fair practices rules for lenders prohibit making the purchase of an insurance product a condition of the loan, and IRDAI's rules give the customer the choice of insurer. Some lenders do insist on insurance of the property against fire and similar risks, because the property is their security; even then, you can generally buy the cover from an insurer of your choice and assign it, or name the lender, as the loan agreement requires.
If you have dependants who would struggle to repay the loan, cover is sensible. The question is which cover. A pure term insurance policy you buy yourself, sized to the outstanding loan, often costs less than a lender's bundled cover, stays with you if you switch lenders, and pays your family rather than only the lender. Compare before you accept the lender's product.
Single-premium policies are sometimes added to the loan amount. That means you pay interest on the premium for the whole tenure. Worked example (illustrative; assume 8.5 per cent): a ₹1 lakh single premium added to a 20-year loan increases the EMI by about ₹868 a month and costs about ₹1.08 lakh in interest, so the policy really costs about ₹2.08 lakh.
If you have been sold a policy you did not want, check the free-look period (the cancellation window after you receive the policy, set by IRDAI rules) and cancel in writing. If you close or transfer the loan early, ask the insurer whether a surrender value or refund is due for the unexpired cover.
Worked example: the full cost of a ₹50 lakh loan
Illustrative; assume 8.5 per cent over 20 years. The EMI is about ₹43,391.
One-time charges (assumed): processing fee of 0.5 per cent, ₹25,000, plus 18 per cent GST, ₹4,500; legal and valuation fees, ₹10,000; stamp duty on the MODT, ₹20,000 (your state's rate may be very different); CERSAI and documentation, ₹1,000. Total ₹60,500.
Insurance offered: a single-premium loan protection policy of ₹1 lakh, to be added to the loan. Declining it and buying term cover separately keeps the loan at ₹50 lakh; accepting it raises the loan to ₹51 lakh and the EMI to about ₹44,259.
The KFS should show all of this in the APR. On a long loan, upfront fees raise the APR only modestly above the interest rate, but they are cash out of your pocket on day one, which our down payment guide counts in the cash plan.
Reading the Key Facts Statement
The KFS is in a standard RBI format. Check the loan amount, the interest rate and its benchmark and spread, the reset frequency, the EMI and number of instalments, the APR, a full list of fees and charges (one-time and recurring), any insurance included, the penal charges, the cooling-off period if one applies, and the grievance officer's details.
If a charge you were told about is not in the KFS, ask for it to be added or confirmed in writing. If a charge appears later that was not in the KFS, and you did not explicitly agree to it, you can refuse it and complain to the lender and then to the RBI Ombudsman.
Negotiating and reducing charges
Processing fees are often negotiable, particularly if you have a good credit report, a large loan, a salary account with the bank, or a competing offer in writing. Lenders also run fee waivers at times. Ask before you log in the application, not after.
Legal and valuation fees are harder to negotiate, but ask whether they are included in the processing fee. MODT stamp duty is a state tax and is not negotiable; but in states where the duty is capped, the cap may make it smaller than you fear.
Do not trade a slightly lower fee for a higher spread. A fee is paid once; the spread is paid every month for the life of the loan.
Property insurance in a flat
In a housing society, the building structure is often insured by the society under a common policy. Ask the society what is covered and for how much. Your own policy can then cover your flat's interiors and contents, and the structure to the extent the society's policy does not.
If the lender asks for property insurance, give it the society's policy details and your own policy, and ask whether together they satisfy the loan agreement. Buying a second structure policy for the same building from the lender's partner may duplicate cover you already have.
If something goes wrong: complaints
Raise the complaint with the lender in writing first, through its grievance redressal channel, and keep the reference number. The Key Facts Statement names the grievance officer.
If the lender does not reply within 30 days, or you are not satisfied, you can complain to the Reserve Bank Integrated Ombudsman at cms.rbi.org.in. Complaints about insurance policies go to the insurer first and then to the Insurance Ombudsman or IRDAI's grievance system (Bima Bharosa).
Common mistakes
Comparing lenders on the headline rate instead of the APR.
Accepting a single-premium policy financed into the loan without working out the interest on it.
Believing insurance from the lender is compulsory.
Ignoring the MODT stamp duty when budgeting for the purchase.
Not asking for the schedule of charges before signing.
Paying EMIs late because the account was short; penal charges and a weaker credit report follow.
Common questions
Is home loan insurance mandatory in India?
No. Neither RBI nor IRDAI makes life or loan protection cover mandatory for a home loan, and a lender cannot make buying a specific insurance product a condition of the loan. Some lenders require property insurance against fire and similar risks, which you can usually buy from an insurer of your choice.
What charges apply on a home loan?
Typically a processing fee with GST, legal and valuation fees, stamp duty on the mortgage document in many states, a CERSAI fee, and later possibly conversion fees, penal charges for late payment, and fees for duplicate documents. All must appear in the Key Facts Statement.
What is APR in a home loan?
The annual percentage rate: the yearly cost of the loan including interest and all charges, shown in the Key Facts Statement. Use it to compare lenders.
Can a bank charge penal interest on a late EMI?
Since April 2024, RBI rules allow a reasonable penal charge, disclosed upfront, but not penal interest added to the rate, and penal charges cannot be capitalised.
What is MODT stamp duty?
Stamp duty some states charge on the memorandum of deposit of title deeds that creates the mortgage. The rate and any cap depend on the state; the borrower usually pays.
Can I cancel insurance sold with my home loan?
Usually within the free-look period after you receive the policy; cancel in writing. After that, ask the insurer about surrender terms, especially if you close or transfer the loan.
Is the processing fee on a home loan negotiable?
Often, yes, especially with a strong credit report, a large loan or a competing offer in writing. Ask before you submit the application, and compare the APR rather than the fee alone.
Sources
- Reserve Bank of India, circular of 15 April 2024, Key Facts Statement for Loans and Advances, applicable to retail loans sanctioned from 1 October 2024 — APR, no undisclosed charges (rbi.org.in); checked 2 October 2026
- Reserve Bank of India, circular of 18 August 2023, Fair Lending Practice – Penal Charges in Loan Accounts, with implementation deferred by the circular of 29 December 2023 to fresh loans from 1 April 2024 and existing loans by 30 June 2024 (rbi.org.in); checked 2 October 2026
- Reserve Bank of India, circular of 18 August 2023 on reset of floating interest rates (disclosure of switching charges), and (Pre-payment Charges on Loans) Directions, 2025 (rbi.org.in); checked 2 October 2026
- RBI fair practices code for lenders and responsible business conduct directions (no conditional sale of third-party products), and IRDAI rules on customer choice of insurer and the free-look period (irdai.gov.in); summarised from independent explainers as well as the regulators' publications; checked 2 October 2026
- Central Registry of Securitisation Asset Reconstruction and Security Interest of India (cersai.org.in); checked 2 October 2026
- EMI and cost figures computed at assumed rates and charges; not quotes
Last checked 2026-10-02.