Buying a home is a complex and exciting process, and there are often hidden costs than just the purchase of property – so it is vital that you do your research and prepare upfront for a much smoother journey.
It is quite easy to get side-tracked by financing and transferring issues when buying a property.
Therefore, it is essential to address the factors below long before the actual buying process starts - and ensure no surprises await you once the transaction has gone through.
These are the questions first-time buyers must ask estate agents:
Don't forget about the other hidden costs
As a home buyer, you also need to be prepared for the additional costs of a property purchase, as well as the ongoing costs of home ownership.
When you buy a home, the additional transaction costs (sometimes called the “hidden” costs) include the property valuation, bond initiation, bond registration, legal and transfer fees, as well as transfer duty if you are buying a pre-owned property.
The first payment likely to be called for is the deposit, which will have to be paid within a specified time frame once the purchase agreement is signed, says Anne Porter, head of Knight Frank Residential SA.
On a home costing R1.5 million, for example, the total of the additional transaction fees would be almost R85 000 – and that’s on top of any cash you might need to pay a deposit.
Some buyers might think that the transfer duty is only payable on transfer of the property into their name, but this is not so. It is payable shortly after signing an offer to purchase, and the lodgement and transfer in the Deeds Office will not go through unless the full amount due to SARS is paid and a transfer duty receipt issued.
Another mistake buyers sometimes make is confusing the conveyancing fees - often referred to as transfer fees - with transfer duty, which is the amount that SARS requires.
If you buy a newly-built home, you will avoid having to pay any duty because VAT will be built into the purchase price.
Then, after you move into your new home, you will need to budget for additional ownership costs on top of your monthly bond repayment, including property rates, municipal service charges, insurance, security and maintenance.
The extra transaction fees can add up to quite a significant amount, on top of the purchase price of your new home, and you will usually have to pay them in cash to the attorneys handling the registration of your new bond and the transfer of the property into your name.
Calculate what your new home will actually cost you
Repeat buyers who have built up equity in an existing home will often use a portion of that equity to pay the transaction costs on their new home, as well as a deposit. “But given the ever-rising cost of living, it can be extremely difficult for young first-time buyers to save up such a large amount, and transaction costs can in fact be a major obstacle for those trying to enter the market.
And in recognition of this, most of the big banks have now re-introduced first-time buyer home loans that include the transaction costs. These bonds are generally granted for 105% of the property purchase price – but buyers should be aware that they may come at a higher interest rate than other bonds.”