The costs of buying a home
If you’re planning to buy a house, it helps to know just what you’ll be paying for the property. Many of the costs of buying a house are things that you might not consider, or could easily underestimate.
To avoid any shocks or surprises, take note of all the costs of buying a home before you decide to commit. Even with affordable home loans, there are many financial commitments that you need to be ready to make.
For many people, homeownership is the ultimate dream. But, like any dream, it comes at a cost.
In This Guide:
- Have you saved for a deposit?
- What about a transfer duty?
- What are transfer costs?
- What is bond registration?
- Do you pay for property inspection?
- Do you need home insurance?
- What about life insurance?
- Are there additional everyday costs?
- What about property maintenance?
Have you saved for a deposit?
A deposit is usually the first cost that people start to prepare for. In fact, you'll need to begin saving years before you're ready to buy.
Compare home loans with and without a deposit, and you'll quickly see that 100% loans come with many extra costs. Having a deposit increases your chance of loan acceptance, reduces interest rates and makes your repayments more affordable.
Ideally, you should save a deposit that's around 10% to 20% of the total value of the house. This will give you access to affordable home loans that you're a lot more likely to be approved for. If you can't do that, any deposit is better than none at all.
What about a transfer duty?
Transfer duty is a government tax, for the transfer of property to a new owner. You'll need to pay transfer duty when buying any property that's over R750,000 in value. Transfer duty rates begin at around 3% of the property value. So as well as saving your deposit of ideally at least 10%, you'll need to save an additional 3% to cover your transfer duty.
What are transfer costs?
Transfer costs are not the same as transfer duty. Where transfer duty is a government tax, transfer costs will be charged by your lawyer to register your ownership with the Deeds Office. Once ownership is registered, the property is legally yours.
What is bond registration?
Typically costing around R10,000, bond registration provides a bank with some loan security. A mortgage bond will be registered as the property is transferred, and the bank's attorney will charge the one-off fee for this essential.
Do you pay for property inspection?
It's beneficial to have an independent inspector take a look over the property. They'll tell you of any red flags, or things that you might need to check up on. Inspectors can look for signs of structural damage that you might not have identified. You will also need an Electrical Certificate of Compliance, to show that the property's electricals meet all current regulations.
Do you need home insurance?
Most banks will require you to have home insurance, protecting the property value in the event of a fire or flood.
What about life insurance?
As well as insuring the property, you'll need to insure your life. This ensures that lenders get their money back even if you die, which means that you'll need to be covered to at least the value of your home.
Are there additional everyday costs?
To make a house a home, you'll need money upfront for energy and water, any payable waste collections and any maintenance charges. These are charges that you might be used to, but should prepare to pay before you move in. In most cases, you'll have to pay a few months in advance before your monthly payments kick in.
Also make sure that you have money to pay a removal company to bring your furniture to your new home, or for any brand new furniture. It's no fun moving in and sleeping on the floor for months!
What about property maintenance?
From the moment you buy your home, you're responsible for property maintenance. If anything goes wrong, you're the one that needs to pay. If the boiler breaks a few months in, you'll need the money for replacement or repair if you want essentials like heating and hot water. If you've spent every spare bit of money on the costs of buying a home, your empty bank balance will not help if anything ever goes wrong.
Make sure that you have money set aside for any essential repairs. Ideally, you'll take out warranties on any big purchases like appliances.
The first few months after buying your home can be difficult ones to get through. Many people default on their home loans within the first 18 months, because they didn't properly prepare for all of the additional costs. Make sure that you have plenty of money set aside, even after buying your home, for the unexpected expenses that appear along the way.