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8 Costs To Consider When Buying A Home 

Dec 19, 2023 | Property

Buying a home is a dream come true for many, but that excitement and happiness you feel can quickly turn to dismay and undue stress when you realise that there are far more costs involved than just the asking price. And the asking price probably seemed sizeable enough, so you might find that it’s hard to imagine adding anything more to the bill. 

These additional costs may be once-off payments, substantial upfront lump sums, and even ongoing monthly costs. The first step is to do your homework so that you have an accurate idea of what you’ll be paying and so that you can take control of your home finances.     

To help you, we’ve put together a checklist of costs associated with buying a home. 

There’s Usually A Deposit 

Most banks require a deposit on the purchase price of your home. This deposit amount ranges from possibly 10% all the way to 30%, although this percentage depends on the bank and your credit rating. The deposit is typically paid upfront and once-off to the transferring attorneys.    

The Bond Initiation Fee 

The bond initiation fee is charged by banks to initiate your bond and to open the bond account. It is regulated by the National Credit Act and is currently set at a maximum of R6 000. You’ll either pay this fee as a once-off or you can include it in the loan amount, to be paid over the period of the bond. Keep in mind, you will still be obliged to pay the fee if the bond application is unsuccessful. 

A Monthly Admin Fee 

Generally, your bond provider will charge a monthly administration fee to administer the loan account. It’s hard to say what this fee comes to, because the amount differs between providers, but usually it’s around R60 – R80 per month. 

The Biggest Cost: Transfer Duties 

Transfer duties are one of the biggest upfront and once-off costs you’ll pay when you buy a home. Essentially, this is a tax levied by the government and no property can be transferred to a new owner if it isn’t paid. The amount you pay depends on the cost of the property you buy, although the rule of thumb is that the higher the value of the property you buy, the higher the duty. A good thing to keep in mind is that property transactions below R1 000 000 are exempt from transfer duty. 

Not Forgetting Transfer Costs 

This is the professional fee that the conveyancing or transferring attorney charges in a property transaction. It’s a once-off fee that they charge to register your ownership of the property with the Deeds Office and protect your legal title to the property.  

Bond Registration Costs 

This cost can be a bit complicated to understand, but simply, the bank needs some form of security over the property you’ve taken a loan out for. So they’ll register a mortgage bond that confers certain rights on them and this bond is registered at the same time as the transfer of the property. It’s done by the bond registration attorney (chosen by the bank) and you’ll pay this fee once-off.  

Similar to transfer costs, this attorney will also charge his professional fee for registering the bond, which the buyer has to pay. On average, on a bond of R2 000 000 should cost R1 691 in registration costs, and R30 544 (VAT inclusive) for the attorney fees.  

These costs are paid once-off, to the bond attorneys prior to registration of the bond.   

Municipality Deposit 

When you buy your home, you’ll need to open an account with your local municipality and pay the required deposit from date of ownership transfer. Once your municipal account has been activated, you must pay your monthly municipal rates and taxes. The deposit amount itself will vary between municipalities.  

Potential Occupational Rent 

You may have to pay rent if you, for whatever reason, take occupation of the property before the transfer of the property into your name has been registered. The actual rent amount is usually something that’s noted down in your Offer to Purchase. 

Feeling Informed? 

There are many costs associated with buying your dream home. The key to ensuring that you don’t bite off more than you can chew and are able to enjoy your new home is to do your homework. That, and finding out how much you can afford before you start looking.  

To check your affordability, use our simple Home Affordability Calculator

We trust that this advice is helpful, and don’t forget that AA Inform is home to a range of useful tools and resources – including a personal loan calculator, access to multiple car and home insurance quotes from the AA Insurance Supermarket, and much more. 

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