Key Facts Statement on a Home Loan: Reading the APR and Charges
Two home loan offers at nearly the same interest rate rarely cost the same. The gap is in the fees, and the Key Facts Statement is the paper that shows it. This guide explains what the statement contains, how the Annual Percentage Rate in it is worked out, and how a home buyer in Bangalore can use it to compare lenders.
What the Key Facts Statement Is
The Key Facts Statement (KFS) is a short summary of a loan in a format set by the Reserve Bank of India. The RBI issued the rule in its circular of 15 April 2024, titled "Key Facts Statement (KFS) for Loans and Advances". Lenders have had to follow it for every new retail and MSME term loan sanctioned on or after 1 October 2024.
The rule covers banks, housing finance companies and other lenders regulated by the RBI. A home loan taken by an individual is a retail term loan, so each of these lenders owes the borrower a KFS before the loan agreement is signed. The same summary is also printed as a box inside the loan agreement.
What the Statement Shows
The KFS brings the main terms of the loan onto a few pages. A home loan KFS carries these items:
- The sanctioned loan amount and how it will be disbursed, in one payment or in stages
- The loan term, the number of instalments and the EMI
- The interest rate, whether it is fixed or floating, the benchmark and the spread
- Each fee and charge payable to the lender, with the amount
- Charges collected for third parties, such as insurance, legal and valuation costs
- The Annual Percentage Rate
- Penal charges, prepayment terms and other conditional charges
- A unique proposal number and the period for which the offer is valid
Two sheets are attached to the statement. One shows how the Annual Percentage Rate was calculated, and the other is the repayment schedule with the principal and interest in each instalment.
The Annual Percentage Rate
The Annual Percentage Rate (APR) is the yearly cost of the loan once the charges are added to the interest. It is always equal to the interest rate or higher. The difference between the two is a measure of how heavy the fees are.
The APR counts every charge the lender collects. Sums that the lender recovers at actual cost for third parties, such as an insurance premium or a lawyer's fee, are part of it too, and the statement lists them separately. One figure therefore reflects the processing fee, GST on it, the legal and technical fees, and any insurance sold with the loan.
An example with two offers
The table compares two offers for a loan of Rs. 60 Lakhs over 20 years. The first is at 8.5% a year, the rate used in our EMI calculator, and the second is at 8.6%. The charges are assumed figures, and the whole example is an illustration.
| Item | Lender A | Lender B |
|---|---|---|
| Interest rate | 8.5% | 8.6% |
| EMI | Rs. 52,069 | Rs. 52,450 |
| Upfront charges, all heads | Rs. 75,000 | Rs. 15,000 |
| APR over the full term | About 8.67% | About 8.63% |
Lender A has the lower rate and the lower EMI, yet its APR is higher because of the heavier charges. The gap here is small, and it changes with the holding period. Upfront charges weigh more when a loan is prepaid or moved to another lender within a few years. A borrower who expects to close the loan early should give the charges more weight than the APR alone suggests.
Three Protections for the Borrower
The RBI rule gives the borrower more than a summary sheet. Three parts of it matter most at the time of choosing a lender:
- Validity: for a loan of seven days or longer, the terms in the KFS stay open for at least three working days
- Charges: a fee that is missing from the KFS cannot be collected at any stage of the loan without the borrower's explicit consent
- Language: the KFS is written in a language the borrower understands, and the lender explains it and takes a signed acknowledgement
The validity period gives time to place two or three offers side by side. The rule on charges turns the statement into a full list of what the lender may collect. A demand for a fee outside that list can be refused by pointing to the statement.
What the KFS Leaves Out
The KFS covers the cost of the loan, and several costs of the purchase fall outside it. Stamp duty and the registration fee on the sale deed are paid to the state and are separate from the loan. The same applies to the builder's charges, GST on an under-construction flat and the cost of khata transfer.
A floating rate is also outside the lender's promise. The APR is calculated on the rate that applies on the day of the offer, and it moves when the benchmark moves. The spread over the benchmark, shown in the statement, is the part that stays fixed unless the borrower's credit profile changes.
Duty on the mortgage document needs a specific check. In Karnataka, stamp duty and a registration fee are paid when the memorandum of deposit of title deeds is registered. Some lenders collect this amount and some ask the borrower to pay it directly, so the KFS may or may not show it. A written answer from each lender keeps the comparison fair.
How to Compare Two Lenders With the KFS
A comparison works best when each lender prepares its statement for the same loan amount and the same term. These steps keep the offers on equal terms:
- Ask for the KFS at the offer stage, before paying a processing fee that will not come back
- Check that the loan amount, term and rate type match across the offers
- Read the APR in each statement and note the gap between the APR and the interest rate
- Go through the list of charges and mark any insurance premium, since most cover is optional
- Read the conditional charges: penal charges, rate conversion fee and prepayment terms
- Match the EMI and term in the repayment schedule with what was discussed
- Decide within the validity period, or ask for a fresh statement once it lapses
The signed copy of the KFS, with its proposal number, should stay in the loan file for the whole term. It is the record to check against when a new charge appears in the loan account statement years later.
Loans Sanctioned Before October 2024
A home loan sanctioned before 1 October 2024 may have come without a KFS in this format. Such a borrower still has the sanction letter, the loan agreement and the lender's schedule of charges as the record of agreed fees. A top-up loan or a balance transfer taken now is a new sanction, and it comes with its own KFS.
The statement is useful at a balance transfer in particular. The new lender's KFS shows the processing fee, legal fees and other costs of moving the loan in one place. Those costs can then be set against the interest saved at the lower rate.
When a Lender Does Not Follow the Statement
A borrower who is charged a fee that the KFS does not list should first write to the lender's grievance cell. The complaint should quote the proposal number and attach the statement. Lenders are expected to reply within 30 days.
The next step is the RBI's Integrated Ombudsman Scheme, which takes complaints against banks and many non-bank lenders online at no cost. Housing finance companies that fall outside the scheme are handled through the National Housing Bank's grievance system. Keeping every fee receipt and the signed KFS makes either complaint simple to prove.
Our team helps buyers line up loan offers along with the home search. Contact us for help with comparing lenders for a specific project.
