Buying property need not be overly complicated or stressful, but it’s not as simple as saving for a deposit and choosing your dream house.
The ‘dream’ can quickly become a nightmare when faced with all the additional costs that come with buying property, so it’s essential to factor these into your budget, says Kay Geldenhuys from mortgage originator, ooba. “As a rule of thumb, you should allow for between 8% and 10% of the purchase price of the property for the additional costs over and above the deposit.”The ‘dream’ can quickly become a nightmare when faced with all the additional costs that come with buying property, so it’s essential to factor these into your budget, says Kay Geldenhuys from mortgage originator, ooba.
“As a rule of thumb, you should allow for between 8% and 10% of the purchase price of the property for the additional costs over and above the deposit,” she says.
Geldenhuys cautions prospective buyers and investors to do their homework thoroughly - to be aware of costs and procedures before even starting to look for a home. “This determines in which price range you can afford to buy,” she says.
Here’s what you need to know to avoid your budget being stretched to breaking point…
According to Specialist Conveyancing Attorney Elana Hopkins of Dykes Van Heerden Incorporated, the purchaser is responsible for the following:
1. Bond registration - conveyancer’s fee: This is the conveyancing attorney’s fee for the service they provide to get your bond registered on behalf of the bank. The fee is governed by the Law Society tariff guidelines and is calculated according to the sale price, with the percentage charged declining as the property price increases.
2. Bond registration - Deeds Office registry fee: The fee charged by the Deeds Office for the legal registration of your mortgage bond.
3. Property transfer registration - conveyancer’s fee: The fee for the service the transferring attorneys provide to get your new home transferred from its old owner and registered into your name. This fee is also governed by the Law Society tariff guidelines and is calculated according to the sale price, with the percentage charged declining as the property price increases.
4. Property transfer registration - Deeds Office registry fee: The fee charged by the Deeds Office for the legal registration of the transfer of the property into the name of the purchaser.
5. Transfer Duty: A government tax levied for the transfer the property from the seller's name into the buyer's name. It generally constitutes the major portion of the additional costs involved and is calculated according to the sale price, with properties of under R750 000 being exempt from transfer duty.
- R750 001 - R1 250 000 = 3% on the value above R750 000
- R1 250 001 - R1 750 000 = R15 000 + 6% of the value above R1250 000
- R1 750 001 - R2 250 000 = R45 000 + 8% of the value above R1750 000
- R2 250 001 - R10 000 000 - = R85 000 + 11% of the value above R2 250 000
- R10 000 001 plus = R?937 500 +13% of the value exceeding R10 000 000
If the seller is registered as a VAT vendor, no Transfer Duty is payable, however, the seller should have included VAT in the purchase price, failing which it shall be deemed to be included unless expressly excluded in the deed of sale. This is usually the case when buying property in a new development - the developer is generally VAT registered.
6. Body corporate or homeowner’s association fee (if applicable): When purchasing a sectional title unit or a property in an estate which is managed by a homeowners’ association, the body corporate or homeowners’ association might require payment from the purchaser of a portion of the homeowners’ association or body corporate levy.
7. Home loan initiation fee: This fee is charged by the bank for the processing of the home loan application. This is a once-off administrative fee prescribed by the National Credit Act and it’s currently R5 985.
“All these extra charges add up to a considerable sum,” says Hopkins, “and, if unprepared or shopping over budget, buyers could easily find themselves in a financial bind - or with no new home to call their very own.”
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