Buying a home is a significant investment, so make sure to prepare for the unexpected or hidden costs that come with home ownership, notes originator, BetterBond.
If you’re buying a home with a bond, the first step is to determine how much you can afford to pay each month on your bond instalments.
Using an Online Calculator
An online calculator can provide a good estimate of what you can afford, taking into account the current prime lending rate.
Consider a Deposit
Put Down a Deposit: It's advisable to put down at least a 10% deposit if possible. Offering a deposit can impact the gross household income required to qualify for a bond.
Impact on Approval: A deposit significantly influences banks' decisions on whether to approve or decline a bond application, according to BetterBond.
Once you’ve found your dream home and your offer to purchase has been accepted and signed, prepare for the following additional expenses:
Extra Expenses
Transfer Duty: This is based on the property value and payable to SARS each time a property changes ownership. Currently, no transfer duty is payable on homes valued up to R1.1 million. For new developments, transfer duty is also exempt but VAT is included in the purchase price.
Transfer Costs: Payable to the transferring attorneys, calculated using a sliding scale based on the purchase price.
Occupational Rent: Payable if you move into the home before it is registered in your name. The seller would also pay occupational rent if they remain in the house after transfer to the buyer. This amount should be included in the offer to purchase.
Bond Registration Fees: Payable to the bond attorneys who register your bond at the Deeds Office. These fees vary but are based on recommended tariffs and depend on your home loan amount.
Bond Initiation Fees: Payable to the bank for processing your home loan application. You can include this fee in your bond or pay it along with your bond registration fees.
Variable Costs: These include FICA fees, electronic instruction fees, and courier costs for documents related to the sale. BetterBond provides a Bond and Transfer Cost calculator to help you budget for these additional costs.
Municipal Rates and Taxes
As the property owner, you'll be responsible for municipal rates and taxes, such as water, electricity, and fibre. Additionally, budget monthly for any repairs or maintenance.
For sectional title properties, there will be a levy for services covering costs like building insurance, security, water, and sewage collection.
Cancellation Penalty Fees
If you are selling your home, remember to notify your bank three months in advance to avoid early cancellation penalty fees.
Also, obtain compliance certificates for electrical, gas, electric fence, water or plumbing, and beetle inspections. Any repairs needed to obtain these certificates will be your responsibility.
Structural Insurance
Once your bond is approved, you must prove you have home insurance before property registration. The insurance cost is based on your home's replacement value, not its market value.
Moving Expenses
Set aside a budget for moving expenses. Moving mid-month can be cheaper than moving at month-end.
Move-in Budget
You might want to live in your new space for a few months before deciding on any redecorating.
However, set aside money for immediate necessities like light bulbs, sink plugs, and new keys or door locks. These miscellaneous items are necessary and can add up quickly.
Despite the costs associated with buying a home, owning property is an invaluable investment that can offer substantial returns in the long term.
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