A home is one of the most important and worthwhile investments you’ll make, so it pays to be prepared. In addition to the value of the property itself, you need to bear in mind the legal and administrative costs that go along with a home purchase.
The home loan
Of course, your main focus is going to be the bond itself. The home loan is granted by the bank and will require you to pay it back in monthly installments, along with interest.
How much interest you’ll have to pay depends on how risky of an investment the bank considers you to be. You can potentially earn yourself a more favourable interest rate by:
- Clearing up your credit record
- Saving up for a large deposit
- Acquiring the services of a home loan comparison service, such as ooba home loans, who can apply to multiple banks on your behalf and negotiate the best interest rate for you.
Whether or not you’ll need to pay a deposit on the home depends on whether you have agreed to pay one in your offer to purchase. It is possible to acquire a 100% home loan, with no deposit required; especially in the current climate where banks are eager to cater to the needs of younger home buyers who are less likely to have the funds for a deposit.
In the event you do have to pay a deposit, it usually ranges from 10% to 20% of the property value. Of course, the larger the deposit, the more likely you are to receive favourable interest rates on the home loan. So it’s your choice between short-term and long-term savings.
The additional costs
Now that we’ve covered the two primary expenses associated with home purchase, it’s time to go over the additional costs; the ones that tend to catch first-time home buyers off-guard.
A home purchase comes with a lot of administrative and legal paperwork. Fortunately, most of this work will be handled by professionals, saving you the headache; but you will have to pay for it.
Transfer of property is the process by which ownership of the property is legally transferred to you. In South Africa, the legal term for this is conveyancing.
It requires the services of a transferring attorney (conveyancer), who will be appointed by the property seller. You will need to sign a few documents, and pay the conveyancing fees. The amount varies depending on the size of your home loan.
You may also be required to pay a transfer duty (a tax levied on property transfers) to the South African Revenue Services (SARS), although this only applies if the property is valued at more than R900 000. (source)
Deeds Office Registry Fee
This is a fee charged by the Deeds Office for registration of the bond, and is also dependent on the size of the home loan. You won’t have to pay the Deeds Office directly, as the conveyancing attorney will include it as part of their charge.
Bond initiation fee
This is a fee charged by the bank for processing the bond application. Some banks charge a flat rate, while others base the fee on the size of the home loan; and they will usually include the fee as part of the balance you already owe them for the loan.
Bond registration fee
This is a fee charged by the attorney for registering the bond.
Additional expenses unrelated to the purchase or legal transfer of the property might include:
How much will it all add up to?
Since many of the fees are tied to the size of the home loan, putting an exact number on it can be tricky. As a general rule, the home buyer should set aside around 10% of the property purchase price to cover additional charges.
You can use ooba home loans’ transfer cost calculator to work out your bond registration and property transfer costs, along with a range of other tools provided by ooba home loans for the purpose of making the home buying process easier. Once you’re done with their home loan calculators, use the ooba Bond Indicator, a free, online prequalification tool, to determine what you can afford. Then, when you’re ready, you can apply for a home loan.