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Hidden costs of buying a home – What you should know

The cost of owning a house, including servicing a home loan, can be significant and must be assessed beforehand.

Home loans, however, are a popular option that help fill this funding gap. (Representational image)

Written by Adhil Shetty

Owning a home is one of the most important aspirations for Indians. As per the Aspiration Index survey, this financial goal ranks among the top three aspirations, alongside mental health and children’s education. With property prices rising, realising this goal simply with a regular income may no longer be possible for many. Home loans, however, are a popular option that help fill this funding gap. The cost of owning a house, including servicing a home loan, can be significant and must be assessed beforehand. So, let’s look at the costs involved in owning a house to help you make this crucial decision.

Cost of the house

The price of the property is a major chunk of homeownership costs. Additional expenses that you must also bear include stamp duty, property tax, parking charges, maintenance fees, and other property upkeep costs.

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Down payment for the loan

Lenders typically finance up to 90% of a property’s value, while the rest must be arranged by the borrower. Down payments vary by property type, location, and size—luxury homes require more, while suburban homes are more affordable. Start saving early to avoid last-minute stress.

Loan EMI, interest & repayment costs

A home loan requires careful planning, as missed EMIs can lead to penalties, legal action, and a damaged credit score. Longer tenures (20-30 years) can lower EMIs but increase interest costs, while shorter tenures reduce overall repayment. For instance, a ₹20 lakh loan at 9% for 20 years results in ₹23.18 lakh in interest, totalling ₹43.18 lakh.

Loan-related charges

Beyond EMIs, banks impose a bevy of other charges for processing the loan (0.25%-2% of the loan). Other charges for legal consultation, documentation, and property valuation may be charged separately or included in the processing fee. Sometimes, developers may offer to waive the processing fee to attract buyers.

Stamp duty and registration charges

Stamp duty, typically up to 6% of the property’s value, and registration charges vary by state, location, and property size. Additionally, brokerage and legal fees (1%-2% of the property value) may apply if you’re purchasing through a broker.

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Memorandum of Deposit of Title Deed (MODT) charges

When you purchase a property with a loan, the bank retains the title deed until the loan is fully repaid. For this, a fee called the Memorandum of Deposit of Title Deed (MODT) is charged, typically ranging from 0.1% to 0.3% of the loan amount, varying by state.

Maintenance costs

Homeowners, especially in apartment complexes, need to pay for amenities like gyms, pools, and play areas. These charges, usually ranging from ₹2.5–₹4 per sq. feet, may be levied monthly or annually. On top of that, unexpected repair and renovation costs can also add to your expenses, making it a good idea to have a separate fund to cover such costs.

Personalising your house

Furnishing your new home also involves significant costs, varying based on your preferences and budget. If you’re moving into a new home from another location or city, hiring packers and movers can also add to your overall costs.

Owning a home is more than the property cost. It includes various other costs like loan EMIs, stamp duty, maintenance, and furnishing costs. Planning ahead and budgeting wisely can help you manage these expenses smoothly and make homeownership stress-free.

(The Writer is CEO of BankBazaar.com)