Prior to taking transfer, there are several costs that need to be budgeted for, as these are over and above the purchase price and cannot be paid via the bond. The banks are no longer granting 108% loans, so transfer costs need to be paid directly prior to lodgement. Transfer costs include transfer duty, which is linked to the value of the property.
Only those homes that cost less than R600 000 are exempt from this tax. In addition, transfer fees are payable to the transferring attorney, and these fees vary depending on the price of the property. For example, a home that costs R2.5 million will attract transfer fees of R20 000, a deeds office levy of R950 and transfer duty of R117 000.
There are also bond registration fees, which are payable to the bond attorney and, finally, the conveyancing attorney will charge for small variable costs such as FICA fees, electronic instruction fees and postage.
In addition, bond costs on a bond of R2.5 million will amount to R18 506 while the extra costs payable to the attorney usually amount to around R2000. Once transfer has taken place, homeowners need to be mindful of their monthly costs, which include: municipal rates, which vary depending upon the area, i.e. the municipality in which the property is located; lights and water; household insurance, as well as bond insurance. Most banks will advise purchasers to take out life cover equivalent to their bond amount so that the bond is settled in the event of premature death. The policy is then ceded to the bank to settle the bond.
Municipal rates have increased rapidly over the past few years and affluent areas have felt the pinch the most. Sometimes this can be a deal-breaker for purchasers who have budgeted carefully for their monthly payments and, therefore, it is vital for estate agents to establish from the seller exactly what his rates are before putting the house on market. This way, purchasers are properly informed when making their financial calculations. Sectional title units bear the additional costs of levies, so these too need to be established up front in order to enable the purchaser to make an informed decision regarding affordability.
While the costs of buying are considerable, property still remains one of the best investments and, over time, the initial financial pressure eases and the capital gain far outweighs any costs borne.
