A home loan is probably one of the biggest financial commitments most people will undertake in their lifetime. Be sure about the costs as well as the hidden costs involved before you start with the home buying process. The amount that you should have available to cover these expenses as well as deposit requirements is estimated at around 10% of the purchase price of the property.
Take a look at the costs involved with a short description of each:
Bank charges are made up by the following fees and interest:
- Valuation Fee – This is the assessment fee and covers the bank for the charges of the property assessor and can be anything between R1000 and R3000.
- Interim Interest – The interim interest is the interest the bank charges from the day the bond is registered until your first instalment.
- Bond Initiation Fee – The bank charges you for administration costs. These costs range between R200 and R5000, depending on the value of the property.
- Administration Fee – After registration, banks charge a monthly admin fee for handling your bond. This fee is minimal and ranges between R5,70 and about R25.
Bond Costs and Transfer Duties
Bond costs can amount to thousand’s of Rands and can have a huge affect on the total value of your property. The biggest part of bond costs will be the transfer duties. Transfer costs are calculated by The Deeds Office, falling under the Department of Land Affairs and they are responsible for the registration of ownership.
Conveyance fees are charged by the attorneys who register the property in your name as well as for the registration of a mortgage bond over your property. The amount of your conveyance fees will depend on the value of your property and are worked out on a sliding scale.
Most banks will require a deposit when applying for a home loan, except for first time buyers. The amount will depend on the value of the specific property, but is usually about 20% of the value of the property.
Home Owners Insurance
Banks will insist that you take out home owners insurance before the loan can be approved. It will be wise to get a few quotes as you might ask your own broker for a quote.
Life Cover / Insurance
Most of the time a bank will insist that you take out life insurance if you do not already have a policy. This is only to protect you and your family and ensure that your home loan is settled in the event of your death. You may ask your own broker for a quote as well.
Your moving costs will depend on the furniture and goods that you have to move. Movers are not cheap and you might want to consider insurance to cover damage to goods during the moving process.
Occupational rent is charged when a buyer moves into the property before it is registered in his/her name. It might sometimes happen that the seller stays in the house after registration and then the buyer might charge occupation rent from the seller for that time.
Rates and Taxes
A property can only be transferred to a new owner once the rates due to the local authority have been paid for the whole financial year. The seller is only liable for the rates for the time he/she occupies the property and the buyer pays for a rates clearance certificate of around R30.
Water Bill, Electricity and Household Costs
Expenses such as water, electrical and telephone connection costs, curtains or blinds, installation of a security system and new furniture are often neglected when you buy a new home. These expenses have nothing to do with your home loan expenses, but you must remember to take them into account when budgeting.
With all these expenses and additional costs in mind, you will have a better idea how to determine your budget. Now you can enjoy the house hunting and buying process.