Prepare for the hidden costs of home buying to avoid financial strain

Purchasing a home is not just about the price tag; it’s also about the myriad of costs that come into play once you’ve made your choice.

For first-time buyers in South Africa, the importance of accounting for transfer costs and bond registration fees often goes unnoticed, leading to unexpected financial strain at a crucial moment.

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, emphasises that understanding these expenses can make all the difference, particularly for those stepping onto the property ladder for the first time.

“Buying a home is a significant financial commitment, and many first-time buyers often overlook the additional costs involved in the process,” Goslett explains.

He highlights that buyers are responsible not only for their mortgage but also for transfer duty (if applicable), conveyancing fees, and bond registration costs. Each of these expenses varies depending on the property's purchase price and the size of the home loan.

To illustrate the financial responsibility involved, consider purchasing a property for R1.5 million. In this case, the estimated additional costs can add up significantly:

• Transfer duty: R 12 000
• Property transfer costs: R 35 392
• Transfer deeds office fees: R 1 544
• Post, petties FICA, other fees: R 2 000
• Total transfer costs: R 50 936

• Bond registration cost: R 35 392
• Bond deeds office fees: R 1 544
• Post, petties FICA, other fees: R 2 000
• Total bond costs: R 38 936

Overall, the total additional costs can amount to approximately R 89 872, a sum that needs to be paid upfront and is typically not included in the home loan.

Goslett warns buyers about the potential ramifications of financing these costs. “Financing these costs will carry additional interest charges and will require monthly instalments in addition to the home loan repayments. For these reasons, it is far better to cover these costs from savings rather than debt,” he advises.

Practical tips to create a savings plan for these costs

• Start early: As soon as the decision to buy a home is made, it’s crucial to begin setting aside money for transfer fees. Utilizing online calculators, such as those available on BetterBond’s website, can provide insight into how much will be needed, allowing potential buyers to craft a specific savings strategy.
• Set up a dedicated savings account: Opening a separate account specifically for home-buying costs can keep the funds organised and promote disciplined saving. Look for high-interest accounts to enhance savings growth.
• Ask about special deals or discounts: Banks often provide incentives like covering or reducing bond registration fees to attract clients. Buyers are encouraged to negotiate and compare offers from different institutions or employ a bond originator for the best possible deal.

In conclusion, being financially prepared for transfer fees can ensure a smooth and stress-free property-purchase process.

“By understanding the costs involved and implementing a dedicated savings plan, you can confidently take the next step towards homeownership without unexpected financial strain. Start saving today so that when the time comes, you’ll be ready to secure your dream home with ease,” says Goslett. 

IOL