The cost implications of buying and owning property.
Owning a property of your own is an exciting thought and one should carefully consider the related costs involved. The worst feeling is to realise after the purchase that you actually can't afford to go ahead, or even worse, to give up the home that you have grown to love.
Take the time and make the effort to understand the full cost implications of purchasing property and the on-going costs in keeping it. Are you financially ready and prepared?
Here are the main types of fees to consider when getting the property registered in your name:
Conveyancing costs: Conveyancing attorneys are paid a fee for registering and transferring a title deed into your name. The amount is determined on a sliding scale based on the price of the property.
Bond registration: There is a once-off fee payable to the Deeds Office for the legal registration of your home loan. This fee is a fixed amount based on the amount of your home loan. Your bond must be registered at the same time as the seller's bond is cancelled and the transfer is registered with the Deeds Office.
Transfer Duty: This is the Government Tax levied for transferring a property from a seller's name into a buyer's name. The relevant amount is based on the purchase price and paid directly to the conveyancer, who will then pay it over to SARS on your behalf. Currently properties of R900 000 or less are exempt from any transfer duty. There is also no transfer duty payable when buying directly from a VAT-registered property developer.
Home Loan Initiation fees: This amount is charged by some financial institutions and covers the administrative setup fees involved in processing your home loan application. This amount is paid on registration of your bond and you could ask for it to be added to your outstanding home loan balance. It is best, though, to pay it upfront and therefore avoid being charged interest on it over 20 or more years.
Postage and sundries: The Attorneys will charge you a small fee for any incidental costs. They will also charge a fee to ensure compliance with the Financial Intelligence Centre Act (FICA).
After the property is registered in your name, the once-off costs of buying a home are now replaced by monthly financial commitments which include:
Your monthly bond repayment. If you are able to pay a little more than the required amount, it will dramatically reduce the duration of the loan and save you thousands of Rands in interest.
Property rates or levies. These are paid to the municipality or the Body Corporate, in the case of Sectional Title.
Utilities. Payable for the use of water and electricity.
Home maintenance. Regular upkeep of your property is essential to maintain the value of your investment. Budget for unforeseen repairs and regular maintenance work.
Homeowners. This insurance will cover you against possible loss of / damage to your property. This is normally mandatory when you have a home loan as it serves as protection of the lender's interest.
Bond protection. This life insurance policy covers you and your family in the event of your being unable to meet your monthly bond payments due to disability, retrenchment or death. New legislation now dictates that life cover is ceded to a bond.
It is prudent to establish exactly what these costs entail before making an offer to purchase a property. Ask your property professional, the attorneys and the mortgage originator for assistance and quotations and carefully evaluate your position before taking the important step in becoming a home-owner.
Author: Adrie Barnard