What kind of key costs should you consider when buying a home?

Buying a home is an empowering and rewarding step for individuals and families. What is key in this process however is to carefully consider the financial demands and implications so that this milestone doesn’t turn into a nightmare. Below are some key costs to bear in mind as your prepare to take this step.

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.

Deposit

Banks typically require a 10% deposit on the purchase price of your home, but this can be as much as 30% depending on your credit rating. If you are in the market to buy, you’ll need to have a deposit in hard cash. It is paid upfront and once-off to the transferring attorneys.

Bond registration costs

For the bank to make sure that they have some form of security over the property you have taken a loan on, they will register a mortgage bond that confers certain rights to them. This bond is registered at the same time as the transfer of the property and is done by the bond registration attorney, an attorney on the bank’s panel. Similar to transfer costs, this attorney will also charge his 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.

Transfer duty

Transfer duty is one of the biggest upfront and once off costs to consider when buying a property. Transfer duty is a tax levied by the government and no property can be transferred to a new owner if this is not 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 (developers as an example), in which case VAT is included in the price. The higher the value of the property you buy, the higher the percentage of duty payable. Property transactions below R900 000 are exempt from transfer duty.

Rates and taxes

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. This amount varies from municipality to municipality and is linked to the municipal value of the home.

Occupational rent

Occupational fee is a fee that is payable only if you take occupation of the property before the transfer of the property into your name has been registered. The rate is usually stipulated in your offer to purchase.

The costs listed above if well taken care of will assist you to have peace of mind.

  AUTHOR
Caxton Central

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