Purchasing a home ranks as the most expensive investment people make, but acquiring that dream comes with a price tag significantly higher than the asking price – and that can affect the deposit you have so carefully squirreled away to make that vital down-payment.

So says Bond Choice CEO, Richard Gray, who acknowledged that the transfer duty, namely the government tax paid to the South African Receiver of Revenue (SARS) on the transfer of property or vacant land from seller to buyer, is the largest additional cost.

“In the latter case the transfer duty is calculated exclusively on the land value, but when purchasing an existing house, a sliding scale applies to the combined land and building value,” he said.

As a means of minimising the costs on entry-level properties, transfer duties are exempt for properties worth up to R500k. However, between R500,001 and R1m the government claims 5% of the value, after which the duty shifts to R25k plus 8% of the value above R1m.

Gray said not to be confused with transfer duty were the transfer fees, which are essentially the attorney’s costs for transferring the property and are levied according to recommended guidelines.

Buyers also paid around R5k in bank initiation fees to cover the costs associated with reviewing the property before the bond could be granted. Gray said should the bank need to repossess the property for defaulted payments, the institution wanted to know beforehand that the asset was worth the amount loaned.

Thereafter, there are also costs involved in registering the bond, again calculated on a sliding scale depending on the mortgage size, while the municipality also wanted to ensure its share. This means buyers are levied up to five months in advance on their annual rates and taxes.

Gray said sellers must provide entomology and electrical certificates costing R300. However, there may be other costs involved should the home need tenting against bugs and white ants (R4k) or electrical maintenance.

Meumann White managing partner, Bruce Forrest, said increasingly buyers must request a copy of the municipal plans for the property they intend purchasing.

“Too often renovations have been undertaken without planning approval – and that means you stand the risk of purchasing a property only to discover you have to knock down a section because it traverses the boundary wall,” he said.

Gray said once transfer had been affected, owners must take out monthly homeowners’ insurance and consider life cover. Homeowners’ insurance covers the replacement cost of the building should it be destroyed.

“Think of turning the house on its roof – what does not move is covered by homeowners’ insurance. Life cover, often a bond condition, pays out on death such that the outstanding payment is secured and that means the family does not lose the house should the breadwinner die before the bond has been paid up,” Gray concluded.

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Fair enough some property co will not disclose such information. Send some more property article, over matters that are overlooked by many. – Thabo Moutlana