04 Jan 2013
While purchasing a home is a very exciting step in creating future wealth, there are costs related to the acquisition which need to be taken into account before proceeding, says Carol Reynolds, area principal for Pam Golding Properties in Durban North and La Lucia.
Reynolds explains that prior to taking transfer, there are several costs that need to be budgeted for, as these are over and above the purchase price and cannot be paid via the bond.
The banks are no longer granting 108 percent loans, so transfer costs need to be paid directly prior to lodgement.
Transfer costs include transfer duty which is linked to the value of the property and only those homes that cost less than R600 000 are exempt from this tax.
In addition, transfer fees are payable to the transferring attorney, and these fees vary depending on the price of the property.
For example, a home that costs R2.5 million will attract transfer fees of R20 000, a deeds office levy of R950 and transfer duty of R117 000.
There are also bond registration fees which are payable to the bond attorney and finally, the conveyancing attorney will charge for small variable costs such as FICA fees, electronic instruction fees and postage.
Bond costs on a bond of R2.5 million will amount to R18 506 while the extra costs payable to the attorney usually amount to around R2 000, she says.
Once transfer has taken place, homeowners need to be mindful of their monthly costs which include: municipal rates - which vary depending upon the area.
For example, the municipality in which the property is located, lights and water, household insurance as well as bond insurance.
Most banks will advise buyers to take out life cover equivalent to their bond amount so that the bond is settled in the event of premature death. The policy is then ceded to the bank to settle the bond.
“Municipal rates have increased rapidly over the past few years, and affluent areas have felt the pinch the most.”
Sometimes this can be a deal-breaker for buyers who have budgeted carefully for their monthly payments, and therefore it is vital for estate agents to establish from the seller exactly what his/her rates are before putting the house on market.
This way, buyers are properly informed when making their financial calculations.
Sectional title units bear the additional costs of levies, so these too need to be established upfront in order to enable the buyer to make an informed decision regarding affordability.
Reynolds adds that while the costs of buying are considerable, property still remains one of the best investments and over time the initial financial pressure eases and the capital gain far outweighs any costs borne.
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