First-time buyers amount to more than half of the percentage of South Africans who have bought home.
While these buyers generally understand and budget for transfer costs, bond registration costs and deposits, many though were put into situations where they had to borrow the funds from family or friends due to the unbudgeted expenses associated with the purchase.
These expenses include transfer duty, which is actually a government tax and very different from the transfer costs charged by the attorneys.
It is a common occurrence where a person signs an offer to purchase, which contain a clause making the purchaser liable for all costs incidental to registration.
As they fail to foresee the additional costs, they will often not budget for it.
Everyone wants wants their home purchase to be a pleasurable experience, and so it is essential to be informed to ensure that it will be.
By educating themselves, purchasers can make sure that they are not short on money by having all the costs calculated. This will then negate having to borrow the necessary funds in order to meet the purchase price.
Nowadays, the banks will rarely grant 100% loans, so buyers will have to come up with deposits, which average from 10% to 30%, depending on factors such as loan to value and their credit score, which will determine affordability and the deposit that is payable.
On a R1 million purchase, you are already paying R100 000 when putting down a 10% deposit.
Then there’s transfer duty, which on a R1 million property would work out to roughly 3% of the value, which will be about R19 000 or R20 000. This is payable before the property can be transferred into your name.
Then the transfer fees, which are charged by the conveyancing attorneys. Transfer fees on a R1 million home would be around R28 000.
There is, however, no transfer duty payable on a property costing R750 000 or less, or when buying directly from a development in a new development.
There are also bond costs, which include deeds office registration fees, and bonds from R1 million to R2 million will incur a fee of about R900, FICA costs, postage and petties.
Rates and taxes are difficult to budget for because they are based on the market value of the property and payable to the local authority for basic services such as refuse collection, building and maintenance of roads, storm water drainage and street lights.
If you are buying a freehold or into a sectional title scheme you’ll have to pay an allocated amount in advance in order to obtain a rates or levy clearance certificate, which is vital for transfer to take place.
It is the buyer’s responsibility to find out what the local rates policies and costs in the area are.
They also need to be aware that they are liable for rates from the date of registration of the property in their name.
Another very important cost to consider is in relation to the cancellation clause.
Banks have a 90-day cancellation clause which means that if you don’t cancel your bonds in time, then you will be liable for a cancellation penalty when selling. And that’s an expense no one needs.
As a final cost to include when drawing up a purchasing budget, it is suggested that you including water and electricity deposits, moving costs, carpet cleaning, painting, and even phone and internet transfers.
Planning for expenses when considering the purchase of a property will be the difference of a stress free process and a stressful one.
Contact our attorneys in Sandton, for assistance with your property purchase or sale.
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