It’s important to understand the full cost implications of purchasing a piece of real estate. The estimated costs of buying a home include a number of once-off fees, many of which are legal or administrative costs, for which you need to be financially prepared.
Taxes and fees you can expect to pay when buying a property include:
- Transfer Duty – This is the Government Tax levied for transferring a property from a seller’s name to a buyer’s name. This percentage amount is paid directly to a Transferring Attorney, who is then responsible for paying it across to the South African Revenue Services, on the buyer’s behalf, before the transfer of the property goes through. No property transfer will be recognised until this fee is paid to the state.
The Transfer Duty amount you’ll be expected to pay depends on the purchase price of the property. There’s no Transfer Duty paid on properties of R1 000 000 or less, for example; different tax thresholds then apply to the transfer of properties of R1 000 001 or more, calculated according to the price range into which the property falls.
- Conveyancing costs – Conveyancing attorneys are paid a fee for registering and transferring a title deed into a buyer’s name. This fee amount is determined on a sliding scale, based on the value of the property.
- Bond registration – You can expect to pay a once-off fee 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 and is paid to the Deeds Office before the registration of your bond. Your bond will have to be registered at the same time as the seller’s bond is cancelled and the transferred is registered with the Deeds Office.
- Postage and sundries –The Registering (Bond) Attorney will charge you a small fee for the postage of all necessary documents (i.e. to you, the Deeds Office, estate agent etc.) to register the property in your name.
- Home Loan Initiation fees – There are some administrative setup fees involved in processing your home loan application. This amount is paid on registration of your bond and is often added to your outstanding home loan balance.
After the Purchase
The once-off costs of buying a home are now replaced by monthly financial commitments, including:
- Paying off your bond
- Monthly levies and taxes
- Monthly rates (water and electricity)
Other optional costs involved in purchasing and maintaining a property include:
- Home Owner’s Cover (HOC)– Many home owners take out additional home owner’s insurance to cover themselves against possible loss or damage to their property. Having an HOC policy is usually mandatory if you have a home loan, to protect the financial provider against risk of loss while the bond is being repaid.
- Bond protection – This life insurance policy covers home owners and their families in the event that they are unable to meet their monthly bond payments, due to disability, retrenchment or death.
Note that there is new legislation that has come into effect since August 2017 with regard to life cover that is ceded to a bond, which can be viewed here. In keeping with these regulations, SA Home Loans Life has designed a Life Insurance Product which complies with every aspect of the regulations.
- Home maintenance – Regular home upkeep is an unavoidable but necessary reality of home ownership. Budgeting for scheduled or unforeseen maintenance work will take the financial pressure off looking after your property investment over the long term.
By knowing more about the costs of buying a home, you can be more financially, emotionally and mentally prepared for the road ahead.