Buying a home is a significant financial commitment. Sure Bond, a subsidiary of Ooba, takes you through some of the additional costs involved, so you can plan ahead.
● Knowing the true cost of buying a home will enable you to budget appropriately.
● Other than the cost of the home itself, the biggest costs associated with buying a property is the bond registration and transfer costs, which are unavoidable.
● Initiation fees are also levied on a home loan and are standard admin fees charged by the bank that granted the loan.
● Additional expenses you should prepare for include moving costs, repairs and maintenance, rates and levies, and security costs.
Wouldn’t it be lovely if the price tag on your new home was all you had to pay? In reality, there are several hidden and not-so-hidden costs associated with buying property. Here are some of the major expenses, to help you prepare.
The cost of buying a house: 8 Expenses you should prepare for
“Buying a home is the single biggest financial commitment and investment that most people will make in their lifetime,” “But there are a lot of other expenses to factor in, and it’s worth planning for these in advance of transfer so that you can be sure you have the funds in place.”
The following expenses should be planned for:
1. Bond registration and transfer costs
These are probably the biggest cost associated with buying a property that home buyers must be aware of and budget for. They are also unavoidable. You can work out the fees on properties you're considering by using a bond and transfer calculator.
But to give you an idea, with a R1 200 000 bond, for a freehold property, with the seller not VAT registered, and the purchase being conducted by a natural person (ie you’re not buying the property as a trust or company), the bond registration cost estimate would be R31 618 (incl. VAT) and the transfer cost estimate would be R31 580 (incl. VAT). Note, these costs are an estimate, and include the bank initiation fee, which other calculators may not include. You should also take into account deeds office fees of approximately R1220, and other fees that may be charged by attorneys at their discretion.
“Banks may not necessarily grant 100% finance which will require the buyer to pay a deposit, and currently only in select instances will some of the banks incorporate the costs of transfer, so make sure that you have the funds available for this vital part of the home-buying process,”
2. Moving costs
You’ve bought the place; now you’re going to have to move in. Depending on where you’ve been living, and how much furniture you already own, you might have to hire a moving company to get you into your new home. It is advisable to obtain a couple of quotes to compare the costs and determine the insurance cover provided for your possessions whilst in transit.
The costs can be anywhere between R5 000 and R15 000 in the same city, but most companies offer a discount if you move in the week and in the middle of the month, when demand is lower. You can also investigate mini movers or bakkie-for-hire options, which would be cheaper, but perhaps a bit more work for you.
3. General repairs and maintenance
While some homes are in perfect condition on the day of transfer, chances are you’ll have to do some cleaning, repainting and general repairs to make yours feel more like home. Some of these will be essential, others will relate to your own personal taste or budget.
“You should definitely set aside some cash for unforeseen expenses,” says Coetzee. “Try to gain access to the property ahead of moving in, so that you can write up a realistic budget for what you will need to spend.”
You should also set aside a few hundred rand for all the basic household maintenance items you will need, like detergents, brooms, cloths and polish. It is helpful to have a few spare light bulbs ready in case you need to replace old ones as well. Don’t forget that houses need ongoing maintenance, so always keep some cash ready for unexpected expenses.
4. Getting the utilities in
If you are buying a freehold property (not a sectional title), you will need to register for your water and electricity connection, and your telephone and internet lines if you need those. These costs vary from area to area, and the internet fee will depend on the type of connection that you want, and whether the relevant lines are already installed.
Generally speaking, put aside around R1 000 to R3 000 for connecting the electricity, water and telephone – but you may be required to put down a deposit with the telephone company as well, depending on your credit profile. Investigate the different internet connection costs with your service provider.
And obviously, once those services are connected, you will have to pay for them every month.
5. Rates and levies
If you have purchased a freehold property, you will have to pay rates and taxes, which can be anywhere from a couple of hundred to a few thousand rand per month, depending on the value of your property and the area. Rates cover sewerage usage and garbage removal, while your taxes are calculated against the value of your property. The estate agent should have included these rates in the information about the property when you were house hunting, but if you need to find out, you can ask the municipality representative when you register for water and electricity. These rates will stay the same every month.
If you have bought into a sectional title, the apartment block’s body corporate will have set a levy to pay every month for the general upkeep of the buildings.
Some suburbs have additional levies that are charged for a street security guard or boom operator. While these are sometimes voluntary, if you benefit from the arrangement, it’s good to contribute.
When buying a new home, it’s a good idea to assess the security of the other houses in the area, and find out about the crime rates from the local police station, and then update your own security accordingly. And you’ll have to budget for a monthly armed response fee as well.
“Many security companies offer a package deal on installation with a contract for a certain term,” “Be sure that you’re happy with the length of the commitment before signing a deal like this, but it can be a very cost-effective way to get a good security system in place.”
Your bank will insist that you have homeowners’ insurance in place to cover any structural damage to the property. This is generally affordable with competitive options available to you. However, your possessions are not covered by this insurance, so it’s a good idea to explore the costs of an additional policy to cover you for theft.
Important to note - If you have existing insurance cover, you must inform your broker of your new address as this can change the risk factors in your policy and alter your premiums.
8. Furniture and electronics
Once you have a home, you will want to fill it with beautiful things. Of course, this kind of refurbishment is a luxury, and one that can be put off until you have settled in. However, if there are any items that are vital to making your life in your new home comfortable, then get a costing on these and factor them into your budget.
Making the home-buying process easier…
“Owning a new home is liberating, but the financial commitment can feel like a burden,” “With forethought and planning, you can budget for the major expenses that are likely to come your way, which will give you a bit of control and confidence as you settle into your new home.”
If you are just thinking about buying a home, or are ready to put in an offer, Sure Bond gets you the best deal on your home loan – for free. To make the home-buying process that much easier, Sure Bond also offers a range of home loan calculators to help make the home-buying process easier. Get prequalified for a home loan with Sure Bond, then, when you’re ready, you can apply for a home loan with Sure Bond
The gift of giving – No better time than now to buy a home !!!
Whether you are a first time buyer or wanting to upscale to another property now is the time to do so with a historically low-interest rate environment that has subsequently created the opportunity for many South Africans to enter the property market for the first time, as it becomes cheaper to buy than rent.
Many people are upscaling, data shows that buyers are looking at properties that previously they may not have been able to afford, with a visible shift in the number of enquiries on properties above R1.5million. Buyers are trying to get the highest bond amount possible from the banks while interest rates are low.
Ooba predicts the Property Market in 2021 will continue to be driven by first-time homebuyers (FTHBs).
FTHBs are expected to take advantage of the continued appetite for banks to lend at high loan-to-value’s and the resultant low home loan instalments. Individuals currently renting a property will shift to purchasing their first property, often at a monthly cost lower than their current rental.
The buoyancy up to R3m (R6m-R8m in high suburbs) will sustain until late into 2021. No rate hikes expected until late 2021 and the market will remain driven by the low interest and favourable mortgage loan terms with first-time buyers moving from rentals and others moving to a better house or neighbourhood, the market will remain well-balanced, favouring buyers, with prices under pressure and below-inflation growth, save for the sub-R1.5m which makes up 85% of current demand.
People who previously rented are now taking advantage of the lower interest rates. Cheaper borrowing costs are also enabling first-timers to buy bigger, more expensive properties than they might previously have considered.
Buyers are also becoming younger, but millennials are still somewhat averse.
We are typically seeing younger buyers now than we might have a year or two ago. Buyers are now often around 34 and up - a trend supported by home loan application statistics. Millennials still appear cautious when it comes to buying properties to live in, but they are becoming more amenable to investment buys.
The current buyer's market is seeing a recovery in housing prices, as SA's weak labour market and the uncertain economic outlook is still expected to impact the sector.
Until our economy recovers from the current pandemic, house price appreciation will remain low for 2021, reflecting a national average of roughly between 2-3% growth Year on Year
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