14 Dec 2011
The thought of owning one’s very own home is a thrilling prospect for many, but it is important to keep in mind that besides the selling price there are many additional costs involved.
All buyers, especially first-time buyers, need to be aware of the various costs that are associated with a purchase before even considering the idea of becoming a homeowner.
According to Richard Gray, CEO of Harcourts Real Estate, before purchasing property a potential buyer needs to seriously consider the impact that the purchase will have on their finances.
He says this is particularly relevant in circumstances where the buyer is wanting to start a family, is in the midst of paying off debt, starting their own business or a new job. He advises them to rather wait until their financial future is more secure and stable before becoming a homeowner.
It is important, says Gray, to establish in advance all hidden costs, and in doing so it will determine whether a potential buyer is financially ready to take the next step.
Gray says extra costs that the buyer is responsible for include transfer duties, conveyancing fees and bond costs. “These expenses, and others, can amount to thousands of rands.”
Transfer duties are a costly expense, however, in an effort to promote home ownership, February 2011 saw the lowering of transfer duties with the introduction of a new transfer duty structure.
This is a tax that is paid to the South African Revenue Service (SARS) for the transfer of the property into the new owner’s name. There is no fixed cost; rather it is worked out on a sliding scale. This essentially means that the more expensive the property, the higher the transfer duty. However, property under R600 000 does not warrant this fee.
Conveyancing fees need to be paid to specialised attorneys (conveyancers) who assist in the registration of property into a new owner’s name. Conveyancers are also needed for bond registration. This fee is generally dependent on the appointed conveyancer and sliding scale. The same conveyancers are not necessarily used in the two different processes.
Other important costs to factor in to the equation are bank charges. If financing through a home loan, costs would include the Valuation Fee (fee for bank appointed property assessor sent to inspect the property before a home loan is granted) and a Bond Initiation Fee which covers the bank’s administration costs.
Home Owners Insurance is generally insisted upon by banks in order for a home loan to be approved, with Life Insurance also suggested - both adding additional expenses.
Gray says to top it all off, moving costs such as the hiring of delivery vans, general maintenance or repairs (painting, new security system, new carpets, etc), connection costs for telephone and electricity to the new property are additional costs that are often not accounted for in the budget.
“Avoid financial strain down the road by calculating far in advance exactly what it will cost you to buy a property.”
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