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.
“Buying a home is the biggest financial commitment that most people will make in their lifetime,” says Linda Rall, provincial sales manager in KwaZulu-Natal at ooba home loans, South Africa’s biggest home loan comparison service. “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.”
She says that the following expenses should be planned for.
Bond registration and transfer costs
These are probably the biggest cost associated with buying a property. They are also unavoidable. You can work out the fees on properties you’re considering by using ooba’s bond and transfer calculator. But to give you an idea, on a R1 million bond for a freehold property, with the seller not VAT registered and the purchase being conducted by a natural person, the bond registration cost estimate would be R27 018 (incl. VAT) and the transfer cost estimate would be R23 980 (incl. VAT).
“Banks may not necessarily grant 100% bonds, and they are unlikely to incorporate the costs of transfer, so make sure that you have the funds available for this vital part of the homebuying process,” says Rall.
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.
This costs 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 move or bakkie-for-hire options, which would be cheaper, but perhaps a bit more work for you.
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 Rall. “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. And remember that houses need ongoing maintenance, so always keep some cash ready for unexpected expenses.
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.
Prepare for 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, 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 most often 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,” says Rall. “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.
Rall also cautions that 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.
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.
“Owning a new home is liberating, but the financial commitment can feel like a burden,” says Rall. “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.”
To make the home-buying process that much easier, South Africa’s leading home loan comparison service offers a range of home loan calculators, including those that determine bond affordability and bond repayments.