Real cost of buying a house
Buying a house costs a whole lot more than the amount on the price tag, don’t be caught off guard
Buying a house is undeniably a major milestone for most people, however first-time home buyers often go in blindly and end up being met with the nasty surprise of bond registration, transfer costs, initiation fees among others, significantly inflating the affordable price tag they first saw on the billboard. So, to avoid these unprecedented revelations at the last minute, let us unpack some of the hidden costs of buying a house.
The deposit is also an important cost to consider when buying a house. Just because you qualified for a 100% home loan does not mean you would not benefit from putting down the accustomed 10% deposit. A deposit is a great way of ensuring that both parties honour their agreement and also improves your chances of securing a favourable interest rate on your home loan from the bank. Also, sometimes the offer to purchase specifically stipulates that the buyer pays a deposit, in which case, not paying the deposit would be a breach of contract. Please note that, similarly to rental agreements the deposit is not paid to the seller as part of the sale but kept safely in an (interest bearing) account until the property transfer and registration process is complete, at which point it will be paid back to the buyer.
To adequately examine the costs of house purchases in their totality it would be expedient to split them into three categories, including costs involved in the home loan, the actual purchase and ownership transfer registration, and finally all the expenses incurred at the end of the road when you are officially a homeowner.
Let’s start with the home loan, which is often the option that most people have to take as not many have the kind of cash needed to buy a house just laying around. It is widely understood that when attaining a home loan, the expectation is that you will have to pay the bank plus interest in installments for a stipulated. However, when it comes to home loans there are once off initial fees that have nothing to do with the loan repayment. These include conveyancing fees (generally between 0.7% and 1.2% of the size of your bond), Deeds Office registration fees (starting from R200 per registration), Post and petty charges (between R250 and R500), VAT (14% of total conveyancer fees and the post and petty charges), and once off administrative fee ( can be as much as R5700).
Next, let’s examine the costs involved in making the property yours, including property transfer attorney fees, transfer duty (tax paid by the buyer to the South African Revenue Service (SARS)), property transfer fees, as well as bond registration fees. BusinessTech offers an example of the registration and transfer costs for a R1.4 million home as below .
|Bond registration (attorney) fees (incl VAT): R29,394|
|Bank initiation fees (incl VAT): R6,037|
|Post, petties, FICA, and other administrative fees (including VAT): R2,400|
|Property transfer (attorney) fees (incl VAT): R29,394|
|Transfer duty: R13,174|
So far, added costs are bordering on R100000 and we have not even factored in the expenses involved in actually living in this home. Once the paperwork is in order, it is time for the exciting part of the process which is to move in, however, as you probably guessed, there are some hefty costs involved in this part of your journey too. Albeit these are generally to be expected, it is always best to be thoroughly prepared.
First in line are moving costs. Depending on where you are moving from (distance form your new place) and how much furniture you already have, moving could burn a hole in your pocket of between R5000 and R15000, for moves from within the same city. Next, to live in this house, you will need utilities like water, electricity and for some people this might include the internet, satellite TV, or a telephone. All these things cost money to connect, and the recommendation is atleast R5000 for a full installation.
As a new homeowner you will need to start paying rates and levies so that the municipality in your area can remove your garbage and take care of your sewerage usage. Generally, these can cost anywhere from a couple of hundred to a few thousand rand per month. Now, unless your new home is a new development altogether, there might be a few dents, breakages and touch ups that you might need to take care of before enjoying your new home, therefore it is definitely worthy to leave a budget for repairs and maintenance. Living in this country, to fully enjoy your place you with some degree of a peace of mind, another homeowner essential cost to introduce to your budget would be house and home contents insurance as well as security. Finally, and luckily a not so urgent expense is the spoils you will be treating yourself with to give your home the look and feel that you want. This really was the point of purchasing your very own abode, wasn’t it? So, somewhere along the way you will need to bring in all the furniture and appliances you’ve always wanted. Quick tip, budgeting for atleast some items ahead of moving in will make the gratification from owning your home that much more meaningful.
Buying a house is definitely one of the biggest personal financial commitments anyone can ever make. As all major leaps, it can be as exciting as it is unnerving, however the important thing is to be sure you see it through the very end of that precious dream without giving in. If you go in unprepared you will find that there are many more mountains to climb before cozying up on a couch settled on a ground that you can finally call your own. This is why it is crucial to know what you are getting yourself into before setting about your journey of making that big purchase.