HomeSmart MoneyPrepare well for the hidden costs to reap the long-term rewards of...

Prepare well for the hidden costs to reap the long-term rewards of owning your own home

Buying a home is a significant investment, so make sure to prepare for the unexpected or hidden costs that come with home ownership, says Bradd Bendall, CEO (interim) of BetterBond.

If you’re buying a home with a bond, the first step is working out how much you can afford to pay each month on your bond installments. An online calculator will give a good indication of what you can afford factoring in the current prime lending rate. “It’s advisable to put down a deposit of at least 10%, if possible,” advises Bendall. “Being able to offer some form of deposit will have an impact on the gross household income required to qualify for a bond. A deposit will also make a significant difference when it comes to banks deciding whether to approve or decline a bond application.”

Once you have found your dream home and the offer to purchase has been accepted and signed, you need to prepare for the following additional expenses:

  • Transfer duty is based on the value of the property and is payable to SARS each time a property changes ownership. The threshold is now R1.1 million, which means that there is no transfer duty payable on homes valued at up to this amount. There is also no transfer duty payable on a new development. However, VAT is included in the purchase price.
  • Transfer costs, which are payable to the transferring attorneys, are calculated using a sliding scale based on the purchase price.
  • Occupational rent is payable if you move into the home before it is registered in your name. The seller would also be liable for occupational rent if they remain in the house once the property has been transferred to the buyer. The occupational rent amount should be stipulated in the offer to purchase.
  • Bond registration fees are payable to the bond attorneys who register your bond at the Deeds Office. These may differ from one law firm to another (but based on recommended tariffs) and will depend on your home loan amount.
  • Bond initiation fees are payable to the bank for processing your home loan application. You can choose to include this fee in your bond or pay it to the bond attorneys along with your bond registration fees.
  • You will also have variable costs as you need to pay for FICA fees, electronic instruction fees and courier costs for documents relating to the sale. BetterBond has a Bond and Transfer Cost calculator that will help you budget for these additional costs.
  • As the owner of the property, you will be responsible for municipal rates and taxes, such as water, electricity, and even fibre. You should also budget monthly for any repairs or maintenance that need to be done.  If you are in a sectional title property, there will be a levy for services, which covers costs such as building insurance, security, water and sewage collection.
  • If you are selling your home, remember that you will have to pay early cancellation penalty fees if you do not give your bank three months’ notice when cancelling your bond.
  • Also, as the seller, be sure to obtain compliance certificates for electrical, gas, the electric fence, water or plumbing and beetle. If anything needs to be repaired to obtain these certificates, you will need to carry the cost.
  • Working with a bond originator is one aspect of buying a home that won’t cost you anything. BetterBond applies to multiple banks, on your behalf, to secure the most competitive interest rate on your home loan. The bank pays the bond originator a once-off fee when the home loan is registered, but this cost is not passed on to you and need not form part of your home-buying budget.

Once your bond is approved, you will need to prove that you have home insurance before the registration of the property can take place. The cost of your cover is not linked to the market value of your home, but to its replacement value. “Remember to also set aside some budget for moving expenses. A good tip is to try and move in the middle of the month, as it is cheaper than moving at month-end,” says Bendall.

And, while you may want to live in your new space for a few months to get a feel for it before deciding if and how you’d like to redecorate, such as painting walls in a fresh new colour, set aside some money in your new home move-in budget for items such as light bulbs, sink plugs and a new set of house keys or door locks. Although miscellaneous, they’re necessary, and can quickly add up to a hefty amount.

Despite the costs associated with buying a home, being able to own a property is an invaluable investment that will offer a considerable return on your investment in the long term, concludes Bendall.