Don’t get confused by the hidden costs of buying your own home

The number of first-time buyers entering the property market has increased significantly, thanks to the historically low interest rates.

When applying for home finance for the first time, buyers should take time to understand all the costs involved before they commit themselves to a set of expenses they cannot truly afford.

These expenses take the form of upfront, once-off fees such as bond registration and transfer costs, as well as ongoing monthly expenses, such as life and disability cover, levies, municipal rates, and taxes.

Buyers need to have a full picture of all these expenses before starting the house-hunting process as this will affect the size of the home loan they can afford.

With regards to the latter set of monthly expenses, most listings will provide details of how much the levies, municipal rates and taxes will be on that particular home.

Buyers can also ask the real estate agent if these details are available online.

Life cover is another mandatory monthly expense that most financial institutions require in order to grant a home loan.

Each bank has their own lending requirements when it comes to life insurance policies.

Instead of having to do the research themselves, BetterBond can advise buyers about the various prerequisites involved when applying for a home loan.

Buyers can also get a good idea of what the upfront bond registration and transfer costs will be by looking at the bond and transfer calculator on its website.

This calculator describes all the various costs involved:

Bond registration costs are fees charged by the attorney to register the title deed into the new owner’s name.

Transfer deeds office fees cover the cost for the deeds office to transfer the title deed into the new owner’s name. There are additional deeds office fees payable based on the bond amount.

The bank initiation fee is to open the home loan facility.

Unless the property is valued under R1 million, transfer duty is payable to the SA Revenue Service over and above the purchase price (its website gives a full breakdown of these costs).

Property transfer costs are payable to the transferring attorney.

Other costs involved during the bond registration and transfer process are labelled as “post, petties Fica [Financial Intelligence Centre Act], other fees” and include cost of telephone calls, postage, courier, administrative costs and bank charges.

There are lots of unknown variables when buying a home for the first time. Buyers should never be shy to ask questions.

Adrian Goslett, regional director and chief executive of Re/max Southern Africa