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Counting the Cost of a House and Home Loans

by Lexis Rodgers (2017-12-07)


When you go shopping for a house to buy, you must be aware of all the costs that will be involved. Apart from the actual purchase price that you and the seller agree on, there are a large number of other costs, some big and some small. Some of these relate to the home loan, while others relate to lawyers' fees and transfer costs. It is a good idea to familiarize yourself with all these costs so that you know exactly what you are going to have to pay out at the end of the day.


The costs you will need to cover

The biggest cost factor will obviously be the purchase price of your new home. But if you are going to mortgage the property then you won't need to have all the money available. You will, though, have additional costs to cover, including fees to register a bond, fees to have the property transferred into your name, as well as other costs including those that various attorneys will charge.


Costs of purchasing a property

The costs related to the purchase itself include transfer duty, conveyancing fees, and a Deeds Office tariff. Buyers are required to pay the transfer duty before the property is registered in their name. The amount payable is calculated according a set scale and then the transferring attorney pays it to S.A.R.S. If the property costs less than R500 000 it is exempt from transfer duty. If it costs between R500 0001 and R1-million, than there is a 5% transfer duty levied, and it increases from there. If you buy the property as a company, close corporation or trust, there is a flat rate of 8%. Conveyancing fees get paid to the transferring attorney (who is a conveyancer) and these are based on tariff guidelines set by the South African Law Society. The Deeds Office tariff is a nominal fee set by the Government, and it relates directly to the purchase or bond price. So, for example, if you buy a property for R1-million, the Deeds Office tariff for land transfer will be about R500 and for the bond, about R400.


Transfer cannot be registered until the relevant local authority has issued a rates clearance certificate. This means that the seller must pay all outstanding rates and taxes first. In the event of the seller having paid these rates in advance, the buyer will be billed for the pre-paid rates from either the date of possession or the date of transfer. If you have bought the property through an agent, the agent will have commission due. While this is usually a cost that is covered by the seller, sometimes buyers agree to pay the fee.


Costs of raising a bond

Very few people today can afford to buy a property without raising a mortgage or loans from direct lenders. In fact when people buy homes, sales are more often than not subject to getting a bond on the property, sometimes even a 100% bond with no deposit needed. Of course the bond will have to be registered and this costs money, not only for registration fees (which are paid to the Deeds Registry), but also to pay for the attorney who handles the registration. There will also be a valuer's fee (or an assessment fee), for the person who evaluates the property to make sure that it is worth at least what bond is to be provided.


So if you are buying a house and looking for a home loan, then you will need to take all these costs into account.


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