Johannesburg - With some banks now once again granting 100% home loans and property buyers returning to the market, prospective buyers, especially first-time owners, need to be fully aware of all the expenses involved in buying a house.
There's a lot more to it than just the purchase price.
There are also, for example, the mortgage registration charges, transfer costs, transfer duties, deeds office fees, costs for connecting the water, electricity and phone, rates and taxes, service fees and insurance.
It's important for prospective buyers to be aware of all these expenses when they decide which house they can afford, said Dr Deon Lessing, marketing director of mortgage originator Betterbond.
To illustrate the importance of this, consider the example of a R1m house for which a R950 000 mortgage bond has been granted. The total amount of additional costs comes to about R50 974, he said.
Prospective buyers must be sure they have this money available.
In addition, Eskom's proposed electricity rate increases of 45% a year for the next three years will push up the running costs of a house severely.
Mortgage registration costs
One expense is mortgage registration, which includes the transfer lawyer's fees. "The bigger the loan, the higher the registration costs," Lessing said.
Registration costs in South Africa are normally calculated on a sliding scale from 2% to 6% of the purchase price. The fee for the mortgage originator who facilitated the bond is between 1% and 1.5% of the loan and is paid by the bank.
Transfer duty
Johan van Heerden, a director of Dykes van Heerden Incorporated, said transfer duty makes up the biggest chunk of costs buyers must pay to have a property transferred to their name.
Transfer duty is paid to the Receiver of Revenue for every transfer. A transfer duty receipt is then issued, which is submitted to the deeds office by the transfer lawyer.
No transfer duty is payable for properties up to R500 000.
For properties from R500 001 to R1m, transfer duty equal to 5% of the purchase price above R500 000 is payable. For properties of R1m and higher, you pay 5% of the amount between R500 000 and R1m and 8% on the amount above R1m.
He said if a property is bought in the name of a company, close corporation or trust, transfer duty is calculated on a uniform rate of 8% of the purchase price. Apart from the transfer duty and transfer costs to the transfer lawyer, the deeds office must also be paid for the registration of the title deeds and mortgage bonds.
Service and connection fees
Lessing said water, electricity and telephone connection fees are minor compared with the mortgage registration and transfer costs, but that the one-off amounts can run up to hundreds of rands.
"According to the Tshwane municipality, the connection fees for water and electricity in the Pretoria area are about R220. Telkom residential installation fees vary between R300 and R400 per line."
Rates and taxes and service fees
These vary from region to region, but Lessing warns that the buyer should find out how much they are, because they have increased a great deal recently.
Insurance
The higher the value of the property, the higher the insurance premium. In view of all these charges, Betterbond recently upgraded the mortgage calculator on its website.
This instrument enables buyers to calculate their monthly mortgage bond repayments and transfer costs, so that they will know how much they must deposit in their home loan account.
"It's a useful instrument for planning purposes as the housing market starts picking up and people start buying again."
- Sake24.com
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