Are Registration Charges Included When Taking a Home Loan?

Property registration and stamp duty charges are two out of the pocket expenses for a home loan borrower. A lender does not assess the cost of registration and home loan stamp duty charges for assessing the Home Loan amount. Therefore, it is important for a property buyer to consider these charges, when evaluating the cost of a mortgage prior applying for a home loan.

There are multiple miscellaneous charges besides Home Loan Interest Rates, processing fees, & penal charges that a borrower should learn about before availing of a home loan.

Additional Info: Also check SBI Home Loan EMI Calculator

Property Registration Fee

Mortgage registration fee is the price you pay to get the house registered to your name. It is usually 1% of the property’s market value or total cost of the property.

Since these are expenses over and above the cost of the property, they are not funded by the bank. Thus if you apply for an SBI Home Loan, the property value will not include the cost of registration or stamp duty. These days however, some banks have started to offer higher loans including the cost of registration.

In the first year of a home loan, you can claim tax deductions for amount paid as on stamp duty and registration fee, subject to maximum of Rs 1,50,000 limit under Section 80C of IT Act.

Stamp Duty Charges

Stamp duty is a tax you pay out to the government for sale or purchase of the property. The charge is calculated as a fixed percentage of property value as decided by the local government. 

Additional Info: You can also avail Navi Home Loan

How stamp duty is fixed? In simple words, the tax levied on the monetary transactions related to the purchase of a property is sales tax. This also comprise of taxes levied on transaction papers of the sale deed, conveyance deed, power of attorney, and so on. The buyer can access these documents only after paying out the stamp duty on the property. 

Duty on all these documents is calculated as per the category of property and its value as evaluated. Then, it is compared with the circle rate and the higher amount is set as stamp duty. 

Likewise, registration charges on a property also vary based on its type and location (State).

SBI Home Loan Stamp Duty Charges

When you apply for SBI Home Loan, the bank will deduct fees and charges such as processing fee (including non-transferrable admin fee, empanelled Advocate/Valuer’s Legal Opinion fee, Stamp Duty (% of project cost), Registration Charges (% of project cost) as set by the respective State Government. These are non-refundable charges for Home Loan.

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What is the Property Registration Process?

The property registration process was first started with the enactment of Indian Registration Act, 1908. The property is registered in the area it is located, by the respective sub-registrar.

To register your house in 2022, follow the steps discussed below.

• Get an estimate of your property’s value to calculate applicable stamp duty.
• Buy non-judicial stamp papers as per the required amount, either online or offline.
• Hire attorney to prepare Sale Deed on your (the buyer’s) behalf.
• Pay charges for Stamp Duty and Property Registration.
• The deed will get registered at the office of the sub-registrar in the presence of two signatory witnesses.
• You are also required to submit documents such as identity proof, address proof and a No Objection Certificate for property.
• After the verification of the documents, the registration process is considered complete. The office of the registrar holds a copy of the documents while you get the original ones.

Additional Info: You can also check Best Home Loan Interest Rates

Tips to Save Registration Charges and Stamp Duty

While investing in the property, carefully assess home loan interest rates and equated monthly instalment (EMI), along with additional costs associated with the property such as housing loan registration charges and stamp duty.

Some factors to consider:

Many states are offering discounted rate of stamp duty charges for home loans, subjected to joint holding by a couple and/or sole registration in the name of a woman. Similarly properties registered in urban and rural areas have different stamp duties. Being aware of these ongoing offers you can tap the benefits as applicable.

Tip: Check CIBIL Score before applying for a loan

Home loan registration charges are usually 1% of the cost of the property.

Besides, the government also gives out the circle rate (government guidance value) of a property based on the area it is located in. Mostly the circle rate of the property is always lower than its market value. Even though you may buy the property at its market value, you can consider registering it at the circle rate. The stamp duty and registration fee will be calculated on the registered value and thus you will save substantially.

When you register a property at its circle rate, it not only benefits you but the seller as well. The seller gets to save on the Capital Gains Tax by letting the buyer register the property at the circle rate.

The balance amount that is the difference between the market value and the circle rate need not be a hidden transaction. Instead, it can be declared as the amount the buyer pays to the seller for the Deed of Transfer of Rights (DOTOR). This requires another agreement to be signed between the buyer and seller.

However the transaction on circle rate will work only in cases where the buyer has substantial cash in hand i.e. 30% - 40% of ready cash  to invest in the property. The home loan amount will also reduce. For, a lender will not fund 100% of the property value. For instance, SBI Home Loan caters maximum up to only 80% (for loans above 20 lakh) of the property value as mentioned in the sale deed. Therefore, if the sale deed reflects the circle rate and not the market value you will be eligible for even lower amount.

However, if your lender is offering Home Loans on sale agreement value and not the sale deed value, you can still get the desired loan amount despite registering the property on the circle rate.

Additional Info: Also check ICICI Home Loan EMI Calculator

FAQs

✅ Is stamp duty and registration fee included in home loan?

The cost of stamp duty and registration fee is over and above the value of the house. A home loan is assessed basis LTV % on the value of property and does not include the cost of registration or stamp duty. 

✅ Does SBI home loan include stamp duty & registration?

SBI Home Loan will be approved basis your income, age, repayment capacity and eligible LTV% on property value. The stamp duty and registration will be deducted as actuals.

✅ Does home loan cover registration charges & stamp duty?

Registration charges and stamp duty are two such expenses that the buyer incurs over and above the cost of the property. This is the expense for completing formality of buying the home. However, banks do not finance registration charges and stamp duty under Home Loans.

✅ Can stamp duty be part of mortgage?

Generally stamp duty is not the part of a Mortgage. However, some lenders do offer additional funding for miscellaneous expenses including stamp duty and registration, provided the borrower meets the other eligibility criteria for loan.

Tip: Check Credit Score before applying for a loan

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