One of the major expenses beyond the purchase price of a home is transfer costs and bond registration fees. It can take time to save up enough to cover these upfront costs, so the sooner buyers start thinking about this, the better.
READ: Property transfer delays - Where to expect them and how to avoid them
“Buying a home is a significant financial commitment, and many first-time buyers often overlook the additional costs involved in the process. Understanding these costs and planning for them in advance can help you avoid financial strain when it comes time to finalise your property purchase,” advises Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
He explains that when purchasing a property, buyers are responsible for covering the transfer duty (if applicable), conveyancing fees, and bond registration costs. These costs vary based on the purchase price of the property and the size of the home loan.
For example, if you are purchasing a home for R1.5 million, the estimated costs are as follows:
Transfer duty: R 12 000
Property transfer costs: R 35 392
Transfer deeds office fees: R 1 544
Post, petties FICA, other fees: R 2 000
Total transfer costs: R 50 936
Bond registration cost: R 35 392
Bond deeds office fees: R 1 544
Post, petties FICA, other fees: R 2 000
Total bond costs: R 38 936
Total additional costs: ±R 89 872
READ: Understanding when VAT applies vs. Transfer Duty in property sales
These costs need to be paid upfront and typically cannot be included in your home loan. If you do not have enough savings to cover these costs, you might have to consider a personal loan or bridging finance options.
“Financing these costs will carry additional interest charges and will require monthly instalments in addition to the home loan repayments. For these reasons, it is far better to cover these costs from savings rather than debt,” Goslett suggests.
To help buyers create a plan for how to cover these costs in cash, RE/MAX of Southern Africa shares the below tips:
Start early
As soon as you decide to buy a home, begin setting aside money for transfer fees.
Set up a dedicated savings account
Open a separate savings account specifically for your home-buying costs. Look for high-interest savings accounts or investment options that can help your money grow while you save. Keeping this money separate will also prevent you from accidentally spending it on other expenses.
Ask about special deals or discounts
Some banks offer incentives, such as covering or discounting the bond registration fees, if they are trying to beat quotes provided by other banks – that’s why it’s so important to shop around or to work through a bond originator to ensure that you get the best deal on your home loan. Don’t be shy to ask your transferring attorney for discounts either - be sure to explore your options and negotiate where possible.
“Being financially prepared for transfer fees ensures a smooth and stress-free property purchase process. By understanding the costs involved and implementing a dedicated savings plan, you can confidently take the next step towards homeownership without unexpected financial strain. Start saving today so that when the time comes, you’ll be ready to secure your dream home with ease,” says Goslett.
Understanding title deeds and the transfer process is key when buying property. According to Quay1 International Realty the title deed is the official legal document proving ownership, and the transfer of property is officially completed once it is registered with the Deeds Office.
READ: Buyers, double check those compliance certificates
There are various aspects that buyers should be aware of:
- The conveyancing process is managed by attorneys selected by the seller, ensuring compliance with all legal requirements.
- Transfer costs and fees are the responsibility of the buyer.
- The process may take up to three months, depending on factors such as bank approvals, compliance certificates, and Deeds Office processing times.
- Before finalising a purchase, it's crucial to verify property details, including ownership history, servitudes, and any restrictions.
Working with the right professionals ensures a smooth transfer, protecting your investment and ensuring a hassle-free transaction.
Before any transfer of property can occur, various compliance certificates will need to be issued. These include electric, plumbing, gas, beetle, and electric fence certificates.
The seller is required to pass the home inspection process to make sure that all these areas of the home are up to code. If not, sellers are responsible to cover the costs of addressing any issues that are pointed out for the certificate to be issued.
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