Don’t let additional expenses put a damper on the excitement and anticipation of buying your home; budget for the extra costs and make sure you have some wiggle room in your financial planning.
You need to take into account the following:
Be savvy when selecting a type of home loan: The biggest expense will be your bond. Experts say it’s best to get pre-approval from your bank for a home loan. The banks will take into account your credit profile and how you handle your debts. This will affect the value of your loan and the interest rate. Banks will also consider your income and expenses – and assess your ability to pay off a home loan. To get an idea of costs, use the online tools to calculate what your monthly bond repayment costs would be. There are different types of loans that you can take a look at – some perhaps more cost-effective than others. The options to explore are Variable Home Loan or Access Bond, Capped Rate Home Loan, and Fixed Rate Home Loan. Consider all your options and compare costs in the long run. (Here, it’s important to compare apples with apples.)
Deposit: Most banks won’t grant 100% bonds so it’s best to save towards at least a 10% deposit, or you will have to finance the deposit amount. Bargain property hunters take note that some banks may grant a 100% bond if the property is priced below its market value.
Bank initiation fee: In South Africa, a flat rate of R6 000 is to be paid before the bond is registered.
Bond registration and transfer duties: These legal costs are big and there’s no way around them as there are multiple financial transactions that need to happen within a set time period. The transfer duty works on a sliding scale based on the property price, from 0% for homes under R750 000 up to 11% for properties over R2.250 million. Bond registration fees and conveyancing fees can also vary from a few thousand Rands to more than R30 000. Your local property expert should be able to advise you on these costs.
Rates and taxes: Rates cover sewerage and refuse removal, and taxes are calculated based on the value of your property. This information is available from estate agents and online property platforms. Experts warn that if you’re buying a bigger home, you can expect bigger costs for heating and cooling, as well as maintaining a bigger garden/pool. If you buy a sectional title unit, there will be a levy to pay each month for the upkeep (or security) of the estate/complex.
Moving or relocation: A move can set you back R5 000-R15 000 in the same city but a lot more if you’re moving cities. If you opt to move during the week and mid-month, the rates are generally lower.
General maintenance: In an ideal world, the house you buy should be in perfect condition but, there may be some extra cleaning, painting or fixing to be done before you move in. It’s best to allow some cash for unexpected expenses.
Security: When you’re house hunting, find out about the monthly rates of armed response companies in your area and make sure the house you’re buying has a good security system in place.
Utilities: You will need to register your water and electricity connection, and telephone/internet lines. There’s usually a once-off connection fee (linked to the value of the property) payable to the municipality.
Insurance: Homeowner’s insurance is mandatory and covers any structural damage to the property. (This doesn’t include insurance on your household goods – household contents need to be insured separately.) This monthly amount obviously varies from home to home.
Settling in: Most fixtures, like curtain rails and blinds, will stay in the house but some sellers stipulate items they want to remove or take with them. This may mean you will have to spend a bit on replacing removable items, like curtains or outdoor furniture.