Whether you’re looking to buy a family home or you’re interested in “flipping” houses, there are a few hidden costs that you need to consider before making an offer. Experts estimate that these hidden costs could add up to as much as 10% on the purchase price, an increase that could push your budget a bit too far.
Below we’ll uncover some of the most common cost surprises when buying a home in South Africa.
Deposit
Your deposit is the amount that you have saved (or available) to put down as the initial payment for your home. The more savings you have towards the down payment, the better.
This is not necessarily a hidden cost but it is very important to keep in mind when buying a home because you may need to use some of these savings to pay for the hidden costs listed below.
Transfer Duty Tax
Transfer duty is best described as a government tax levied to transfer a property from the seller to the buyer’s name. It is calculated on the fair value of the property which, in most cases, is the purchase price of the property. There is no transfer duty on properties under R1000000.
Transfer Attorney Costs
These costs are the legal fees due to the conveyancers who transfer the ownership of the property into the buyer’s name. These costs also include other administrative expenses including the Deeds Office registration, postage and disbursements charged by the conveyancers.
Bond Attorney Costs
These are fees paid to the attorneys who handle the registration of your bond. The bond attorney costs also cover postage and disbursements charged.
Bond Initiation Cost
This is a fee charged by the bank or lending institution to open a loan account. In most cases, it will also cover the ongoing administration of the bond.
Homeowners Insurance
Your bank or financial institute will insist that you have homeowners insurance in place to cover any structural damage to the property. Generally, this type of insurance is relatively affordable and can be found at competitive rates. Your households possessions are not covered by homeowners insurance so it is advised to invest in an additional policy to cover your personal belongings.
Rates, taxes and levies
Rates, taxes and levies are fees paid to the authority that services your property. If you are buying a freestanding home you will be charged monthly for municipal rates and taxes which covers roads maintenance, street light maintenance and refuse collection.
If you are buying a property in a complex or estate, you will be charged levies. These costs cover the running of the complex and include municipal rates and taxes, limited building insurance coverage, repairs and maintenance.
It’s important to understand the underlying costs involved in buying a property; failure to factor these costs into your budget could leave you feeling financially stretched or unable to even make an offer.