When it comes to purchasing a home there are more financial elements to take into consideration than just the bond repayment. This is according Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, who points out that while the bond repayment is a major consideration, there are also a number of other costs that a potential home buyer will need to make provision for.
“Very often when buyers are looking for a home that they can afford, they look at how much they will need to pay on their bond each month. But it is important to remember that buyers are also responsible for the costs of registering the new bond, as well as the transfer costs. These transfer costs include both the conveyancing fees and transfer duty, which is calculated on a percentage of the purchase price. The percentage charged for the transfer duty can vary depending on the buyer’s legal status. The buyer is also liable for an initiation fee on the bond and the cost of having the property inspected,” says Goslett.
He notes that it is often easy to overlook these costs when assessing affordability and establishing a purchase price that is within the budget, especially if it is the first home that the buyer is purchasing. “However,” says Goslett, “as these costs will affect the total financial layout of the property purchase, it is vital that they are taken into consideration. Having a clear understanding of what they are financially liable for will assist buyers to prepare for the costs of buying a home before they take their initial steps towards entering the market.
Knowing all the costs involved upfront will ensure that the buyer is not caught unaware and having to pay out thousands of rands with very little notice. A reputable, experienced real estate professional will be able to provide the buyer with a schedule of costs they can expect to pay.”
Goslett gives a basic rundown on the costs that buyers can expect to pay:
While not completely unheard of, it is very rare that banks will provide a 100% bond. This means that the majority of buyers in today’s market will require a deposit based on a percentage of the home’s purchase price. “Generally buyers can expect to pay a deposit of between 10% and 30% of the purchase price of the home. The deposit is usually kept in an attorney’s trust account until the property is transferred into the buyer’s name, and the money will accrue interest payable to the buyer. The deposit amount will be stated in the offer to purchase presented to the seller,” says Goslett.
The registration cost is the amount charged by the bank to register the bond. On a bond of R1 million with no deposit paid, the registration cost will be in the region of R12 859.20, excluding transfer costs. If a deposit of R100 000 is paid bringing the bond amount down to R900 000, the registration cost would be in the region of R11 764.80.
The South African Government levies a tax on property transactions that is paid when a property bought and transferred into a buyer’s name. If purchasing vacant land, the transfer duty is based on the value of the land. However, transfer duty on an existing home will be based on the value of the land and building. Transfer duties are not charged on homes priced under R750 000. A 3% transfer duty rate will be charged on property priced between R750 001 to R1 250 000, for properties priced from R1 250 001 to R1 750 000 the transfer duty will be R15 000 plus 6% of the property value above R1 250 000. Properties between R1 750 001 and R2 250 000 will incur a transfer duty of R45 000 plus 8% of the property value above R1 750 000, while transfer duty for properties over R2 250 001 will be R85 000 plus 11% of the value above R2 250 000.
If the property is purchased in the name of a CC, company or a trust, a standard transfer duty of 10% of the purchase price will be charged. Should a property be bought from a developer, a VAT portion will be paid rather than the transfer duty on the purchase price.
These are the fees paid to the conveyancing attorneys to register the property into the buyer’s name and for the bank appointed conveyancing attorneys to register the bond over the property. Recommended tariffs for conveyancing fees have been set by the Law Society and these costs are based on the property’s purchase price. The higher the purchase price, the higher the fees.
Deeds office registration fees
The deeds office will complete all that is required to register the bond into the buyer’s name, and a fixed fee of around R800 is payable for this service. Deeds office registration is the final step and takes approximately 15 days.
Stamp duties and admin fees
Stamp duty is a government tax payable by the purchaser when a property is sold. There will also be sundry costs payable to attorneys for postage and other items. Postage and sundry costs are generally around R150.
“In order to avoid any surprises it is important that the buyer prepares for purchasing a home by saving up for all the costs involved. Having the required finances in place before embarking on the home buying process will make it far simpler,” Goslett concludes.