Lifting the lid on true costs of buying
Property practitioners should advise prospective buyers of all hurdles when buying a property. For buyers investing in second or third properties, most of the regulations and administrative processes and string of expenses will be well known, but it is especially first-time buyers who need to be guided.
The advertised price of a property is but one of the expenses that need to be covered by the buyers, but there is more to pay than the asking price.
Property professionals Paul Stevens (CEO, Just Property) and Samantha Craddock (Partner, Kaplan Blumberg Attorneys) lift the lid on the actual cost of buying a home to help first-time buyers budget properly.
Bond initiation
Your bank will charge you for initiating and opening your bond. This fee may not exceed R6,037. It can be added to your bond amount, if necessary, but you will save on the interest charges if you pay it upfront.
Legal Fees
Buying a home involves three types of conveyancing attorneys, who each charge a fee: bond attorneys, cancellation attorneys and transfer attorneys.
The bond attorney will register your bond and prepare the related documents. Their fee is based on the bond amount to be registered, guidelines issued by the Law Society of South Africa and the type of property, with sectional title properties attracting additional costs.
You might be able to negotiate slightly but expect to pay around R15,000 ex VAT for a R500,000 bond and R55,000 ex VAT for a R5 million bond.
A bond cancellation attorney is required to cancel an existing bond on a property - for example, if you have a bond on another property you have sold. This fee is independent of the required "90 -day" penalty interest a bondholder is entitled to charge when the bond is under cancellation. The average bond cancellation fee for cancelling one mortgage bond ranges between R 4800 - R 5200 (an additional fee will be added for an additional bond to be cancelled).
The transfer attorney is appointed by the seller, but the buyer pays them for registering ownership of the property in the buyer's name with the Deeds Office. An amount for items like postage and FICA will be added. Expect to pay around R 13 000.00 ex VAT for a R 500 000 property and R 57 000 for a R 5 000 000 million property.
Deeds Office
The Deeds Office will charge you a fee for registering your bond over the title deed. This fee may be paid by your transferring attorney, who will then bill you for it, and you can expect to pay around R 755 for properties of R500,000 to R 2350 and up for purchases of R 5 million.
Transfer duty
This tax is normally the largest cost you will need to pay over and above the purchase price of a property. It must be paid to SARS within six months of the property transfer.
Budget for around R50,000 on a R2 million property and R366,000 for a R5 million property.
Monthly bond administration fee
Your financial institution will charge a small monthly admin fee, usually under R100.
Insurance premiums
To get a bond, you will be required to take out homeowner insurance/structural replacement insurance. This is on top of your normal household insurance. Costs vary so shop around. Depending on your credit scoring and or risk assessment, life cover could be a condition of your mortgage loan agreement.
Moving costs
Depending on whether you use a minivan or a pantechnicon, you could be charged anywhere from a few thousand rands up to tens of thousands. It is always cheaper to move mid-month.
Connecting to utilities
Owners of freehold property will need to register for water, electricity, and a landline. You are looking at a few thousand rands. Do not forget about the cost of an internet connection and fibre.
Rates and levies
The liability for a purchaser could entail making provision for 1 - 2 months' worth of the municipal rates and the body corporates levy premium, payable in advance, after the registration date. You will pay monthly rates for rubbish collection and sewerage, and taxes based on the value of your home.
Shortly after registration, a deposit is charged to open a new water and/or electricity account at the council's office - approximately R350 water deposit and R 450 electricity deposit. Owners of sectional title property will pay a set levy every month.
Security, maintenance, and renovations
Some suburbs have security in place, which you will need to contribute to. And you will need to decide whether to contract with an armed response company.