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Purchasing a new home is a whole new chapter in a persons life and can be very exciting but can also turn out stressful if you haven’t prepared for all the costs you’ll soon need to pay.
Extra costs which could be once-off payments, substantial upfront lump sums or even ongoing monthly costs eg. electricity, water and refuse removal (on your municipal account), garden and cleaning services, maintenance, painting and so on, which all need to be budgeted for.
Doing your homework is very important in planning your finances. Important Costs to remember.
1. Deposit
In todays market, one can try apply for a 100% Loan depending on certain banks criterias but Banks typically require a 10% deposit on the purchase price of the home. It can even be as high as 30% depending on your credit rating. So, you’ll need to have a deposit in hard cash. It is paid upfront and once-off to the transferring attorneys.
2. Transfer duty and Transfer costs
Besides the deposit, the transfer duty is one of the biggest upfront and once-off costs to consider when buying a property. Transfer duty is a tax by the government and a property cant be transferred to a new owner without this being paid. The only time transfer duty is not payable in a normal sale of property is when you are buying from a registered VAT vendor (eg. A developer)
The higher the value of the property you buy, the higher the percentage of transfer duty that is payable. Property transactions below R750 000 are exempt from transfer duty.
Transfer cost is a fee that the conveyancing/ transferring attorney charges to do the property transaction and to register your ownership of the property with the Deeds Office. This is paid once-off before registration and is not to be confused with transfer duty.
Use our handy calculators on our website.
3. Bank Initiation fee
This fee is charged by the bank at the start of the loan (if you take out a bond). It can be paid upfront and as a once-off fee, or capitalised to your loan amount. The fee is regulated by the National Credit Act and is currently set at a maximum of R5 000 and is often included in your homeloan.
Use our handy calculators on our website.
4. Bond registration costs
If you have taken out a homeloan/bond over the property, Similar to transfer costs, the bond attorneys appointed to register your bond will also charge a professional fee for registering the bond, which the buyer has to pay. This cost is paid once-off, to the bond attorneys prior to registration of the bond.
Use our handy calculators on our website.
5. Moving costs
Get quotes and shop around for the best prices and service, also it is more expensive to move month end because it’s the busiest. Some removal companies offer special pricing during off-peak times, so don’t be afraid to ask.
6. Homeowners and Life insurance
If taking a homeloan/Bond, the bank will require protection to ensure that the value of their security on your loan, the house, remains intact. The bank will require that you take out two types of insurance which need to stay in place for as long as you have the loan with the bank.
- Homeowners’ insurance which protects the bricks and mortar of the property against things like fire, flood and so on.
- Life cover which in the event of the death of the property owner or bond holder, the insurance will settle the outstanding bond amount so that your family is not lumbered with the debt you owe to the bank.
You have the option to take this insurance through the offering via your bond provider, or through your current preferred broker or insurer. It is often worth comparing and shopping around to see where you get the best offer. Where you do not use the bank’s offering you will need to provide proof of external insurance.
7. Contents insurance
Although not obligatory, it’s highly recommended that you insure the contents of your home against loss or damage as a result of theft or burglary and other perils such as fire, flood and extreme weather conditions.
This insurance is often combined with homeowners insurance, and if you have car insurance, with one insurer, this usually results in a much cheaper combined premium.
8. Rates and taxes and Water and Electricity.
Once the transfer is completed, you will need to register for rates and taxes as well as your water and electricity services. The municipality will require a deposit - the amount varies from municipality to municipality and is linked to the municipal value of the home.
Doing your financial homework before hand is key to having the peace of mind that you can manage with all the costs, and enjoy your new home and the making of many happy memories.