South Africa is currently in the midst of a buyers' market, creating an opportunity for first-time buyers to purchase property. On top of that, banks are extending the threshold of 100% loans to qualified buyers, and in some cases even 105% loans to cover the transfer costs and registration fees.
Before you begin the home buying process, you need to see if you can actually afford it. This will require doing a thorough audit of your finances to see what you can comfortably afford to spend on a house. 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 property valuation, bond initiation, bond registration, legal and transfer fees, as well as transfer duty if you are buying a pre-owned property. If you buy a newly-built home you will avoid having to pay any duty because VAT will be built into the purchase price.
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.
For example, on a home costing R1.5m the total additional transaction fees would be almost R85 000 on top of any cash you might need to pay a deposit.
Once you have calculated all your monthly expenses to see what disposable income you can put towards paying off a home loan, you then need to figure out the price range you should be shopping in. If you're making an offer as a first-time home buyer, you need to do your homework before negotiating with the seller. Look at the location and size of the property, the current economic and market conditions as well as the prices of similar properties in the area. All these must be factored in when putting in your offer.
If you are using an estate agent, the agent will serve as the "middleman" and will present your offer to the seller. If a final price is agreed upon, you will complete the formal offer to purchase. Once you and the seller have signed the document, you are both legally bound by it.
After your finance has been approved and you have paid all costs to the transferring attorney, the transfer process will begin.
It is currently a property buyers' market, but it is essential to do your homework first so that buying your dream home doesn't turn into a financial nightmare.
The stagnant economy, slightly lower prime lending rate, and increased number of properties for sale in numerous locations are encouraging some potential buyers – who might have been sitting on the fence – to seriously explore the market.
Before signing on the dotted line, however, it’s important to inform yourself about the hidden expenses that come with buying a property.
Insurance (including homeowner's, life and household contents cover) tops the list, because it will help protect you should something unfortunate such as theft, fire, or major damage affect your house. Furthermore, every month you would need to pay for your water and electricity, plus rates and refuse removal.
Owning a home also requires regular check-ups and repairs, while installing a good security system is likely to be a key priority to keep you and your possessions safe.
If you're living in a sectional title estate, you may also be required to pay monthly levies for the upkeep and management of the communal property.
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