The first thing you need to ensure before buying a property is that you are buying the property in an area suitable for the whole family. Buying a property is an expensive process.
Cost to consider and factor into your budget.
Banks might require you to have a deposit which is generally a percentage of the purchase price and will depend on your credit rating. This could be a little as 10% or as much as 30%. This will also reduce your monthly bond instalment.
- Initiation fee
This is a fee charged by the bank to process your home loan application. You could pay it upfront or have it added to your loan amount. This fee is regulated by the National Credit Act and is currently set at a maximum of R5 250.
- Moving cost
The cost of moving will depend on the content of your home, your location and when you choose to move. Generally mid-week and mid-month moves are more affordable than weekend and month ends.
- Transfer Duty
Transfer duty is payable by the buyer on any property over R1 million. This is a tax levied by the government to transfer the property from the seller’s name to the buyer’s name and has to be paid upfront to the transferring attorney. Transfer duty is not payable when you are buying directly from the developers in which case VAT is included in the price.
The higher the value of the property you buy, the higher the percentage of duty payable. Property transactions below R1 Million are exempt from transfer duty.
See SARS website for transfer duty rates based on property price categories.
2022 (1 March 2021 – 28 February 2022)
|Value of the property (R)||Rate|
|1 – 1000 000||0%|
|1 000 001 – 1 375 000||3% of the value above R1 000 000|
|1 375 001 – 1 925 000||R11 250 + 6% of the value above R 1 375 000|
|1 925 001 – 2 475 000||R44 250 + 8% of the value above R 1 925 000|
|2 475 001 – 11 000 000||R88 250 +11% of the value above R2 475 000|
|11 000 001 and above||R1 026 000 + 13% of the value exceeding R11 000 000|
- Transfer costs
Transfer costs are the professional fees charged by the transferring attorney to register your ownership of the property with the Deeds Office. This is a once-off fee and payable prior to the transfer being registered.
- Bond registration fee
The bank will register a mortgage bond as security over the property. This is done by the bond registration attorney, an attorney on the bank’s panel.Similar to transfer costs, this attorney will also charge his professional fee for registering the bond, which the buyer has to pay. This cost is paid once-off, to the bond attorneys prior to registration of the bond
- Homeowner or building Insurance
This is compulsory as it gives the bank the protection and security on your loan. Homeowners insurance protects the brick and mortar of the property against insured pearls such as fire, floods etc.
- Bond Cover
If you’ve taken out a home loan, the bank will usually insist that you provide security for the loan in the form of life cover which is ceded to the bank.
You need to plan for the cost to have your water and electricity connected. Your phone and internet connections as well as your security system and armed response.
- Ongoing cost of owning a home
Ongoing costs will include electricity,water and rates and taxes. You will also have to do regular maintenance to ensure your property retains its value.
What a FPI profession member can do for you
A FPI professional member will assist you to ensure that you have taken all relevant costs into account and explain the impact of your purchase on your estate as the value of your estate will increase as well as your liabilities.
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