Hidden costs first-time homebuyers must know.

There's more to pay than the asking price. Often property investors or first-time buyers overlook the 'small things', and this can end up costing the property buyer thousands of rands in the long run.

Property professionals lift the lid on the true cost of buying a home to help first-time buyers budget properly.

Bond initiation fee

Your bank will charge you for initiating and opening your bond. This fee may not exceed R6,037. It can be added to your bond amount, if necessary, but you'll save on the interest charges if you pay it upfront.

Legal Fees

Buying a home generally involves three types of conveyancing attorneys, who each charge a fee: bond attorneys, cancellation attorneys and transfer attorneys.

The bond attorney will register your bond and prepare the related documents. Their fee is based on the bond amount to be registered, guidelines issued by the Law Society of South Africa and the type of property, with sectional title properties attracting additional costs.

You might be able to negotiate slightly but expect to pay around R15,000 ex VAT for a R500,000 bond and R55,000 ex VAT for a R5 million bond.

A bond cancellation attorney is required to cancel an existing bond on a property - for example, if you have a bond on another property you've sold (perhaps to buy your new home). (You will require the services of a cancellation attorney when your bond is paid up too.) This fee is independent of the required "90 -day" penalty interest a bondholder is entitled to charge when the bond is under cancellation.

Fees will be according to the Law Society of South Africa's conveyancing fees guidelines. The average bond cancellation fee for cancelling one mortgage bond ranges between R 4800 - R 5200 (an additional fee will be added for an additional bond to be cancelled).

The transfer attorney is appointed by the seller, but the buyer pays them for registering ownership of the property in the buyer's name with the Deeds Office. Their fee is based on the property's value and according to guidelines issued by the Law Society of South Africa. An amount for items like postage and FICA will be added.

It is important to note that the examples above do not account for the related disbursements, for example, postage and petties, FICA identification fees, and deeds office searches.

Deeds Office Fee

The Office will charge you a fee for registering your bond over the title deed. This fee may be paid by your transferring attorney, who will then bill you for it, and you can expect to pay around R 755 for properties of R500,000 to R 2350 and up for purchases of R 5 million.

Transfer duty!

This tax is normally the largest cost you will need to pay over and above the purchase price of a property. It must be paid to SARS within six months of the property transfer.  (If a seller is VAT registered, you will pay VAT instead of transfer duty. This is often the case when buying a property in a new development.)

Monthly bond administration fee

Your financial institution will charge a small monthly admin fee, usually under R100.

Insurance premiums

To get a bond, you will probably be required to take out homeowner insurance/structural replacement insurance. This is on top of your normal household insurance. Costs vary and you don't have to take the product recommended by your financial institution, so shop around. Depending on your credit scoring and or risk assessment, life cover could be a condition of your mortgage loan agreement.

Moving costs

Depending on whether you use a minivan or a pantechnicon, you could be charged anywhere from a few thousand rands up to tens of thousands. It is always cheaper to move mid-month, so try to arrange that.

Connecting to utilities

Owners of freehold property will need to register for water, electricity and a landline. You're looking at a few thousand rands.

Don't forget about the cost of an internet connection and fibre.

Rates and levies

The liability for a purchaser could entail making provision for 1 - 2 months' worth of the municipal rates & the body corporates levy premium, payable in advance - after the registration date. You will pay monthly rates for rubbish collection and sewerage, and taxes based on the value of your home.

Shortly after registration (mostly in freeholds), a deposit is charged to open a new water and/or electricity account at the council's office - approximately R 350 water deposit and R 450 electricity deposit.

Owners of sectional title property will pay a set levy every month.

Security, maintenance and renovations.

Some suburbs have security in place, which you will need to contribute to. And you will need to decide whether to contract with an armed response company. If your home doesn't have a good system in place, this is a good time to ask the security company about a package deal for an upgrade.

Top Tips to Lessen the Pain

• Give yourself two to three years of serious saving. Tighten your belt and put as much as possible away for a deposit.
• Spend six months before you start looking for a house to improve your credit score - this will help you get the best rate on your bond.
• Find an estate agent you trust who comes highly recommended for the suburb you're considering. They will be able to give you a true idea of current pricing and other tips about the area.
• Negotiate on the asking price - a good agent will do this for you.
• It doesn't cost you a cent to let a bond originator to get you the best deal on your bond from the banks, and it could save you hundreds of thousands of rands in interest over your bond term.
• If there's an attorney you know well, you could ask the seller to appoint them as the transferring attorney. If not, remember that you can try to negotiate the conveyancing attorney's fees before agreeing. You can call for Pro-forma cost statements from any Conveyancing Attorney firm to roughly set out the transfer and bond registration fee applicable to the purchase price you have in mind.
• Shop around for the best deal on homeowners' or bondholders' insurance, movers, etc.
• Remember, it's cheaper to move during the month than at the end/beginning of the month.

Find out how much bond you qualify for

Here are some of the best tricks when moving out for the first-time

Whether you're moving out of your house with your roommates or with your partner, the need for landing on the necessary habits of better planning never dies.

Here is a list of things you should apply when you start living independently.

1. Bring changes to your lifestyle

Living in your parent's house is different, as there's no burden of responsibilities on your shoulders. But when you decide to live alone in your own home, a bunch of duties pops up. But don't worry; if you keep your lifestyle on track, there will be no milestone that you can't achieve.

2. Take a look at your finances

One of the most critical parts about leaving your house for the first time is to deal with your every-day increasing expenses. All you've to do is to plan and finance your future life. But the question that knocks out your head is how you're going to do all this? Make a budget to figure out your expenses. Buy everything ranging from your utility needs to furniture should be in your budget.

The best way is to note all your expenses for the month on a notepad and spend your money accordingly. Plus, keep water, petrol, and electricity in control as it also influences the budget.

3. Choose the best location

The choice of location for your future house will influence your troubles a lot. No doubt it's relatively easy to compromise with your needs, but still, you've to buy reliable real estate where all your needs are on your doorstep. 

4. Find yourself a permanent Job

Taking a brave decision to move out of the house for the first time isn't appropriate unless you have a steady job pushing you up financially. As you're going to face millions of problems economically and emotionally, only a permanent job resolves all your matters. It's the best advice to have a steady job before moving out of the house.

5. Always have a plan B

Not everyone who's moving out of the house is the one who gives a potential setback to the upcoming problems. There're chances that you may get fail in building yourself up. But don't bother about it much; having a plan B when moving out of college is the only thing you can do to save your living.

6. Go for renters' insurance

The unfortunate time comes without informing. Thus, the best way to push yourself up in such circumstances is to have renters' insurance. Choose the policies which have low monthly payments or those that offer full replacement coverage.

Stand On Your Own

Shifting in your house by moving out for the first time seems like a daunting task. But you shouldn't get confused after reading the tips we've talked about above. Adopt them in your life and see your development in days.

Tips on how to successfully buy your first property.

1. Research

When starting your journey into home ownership, it's crucial to thoroughly research the real estate market, property values, and neighbourhoods. Understanding the local market conditions will empower you to make informed decisions and find the right property that suits your needs.

2. Bond originator

Before committing to a particular property, speak to a bond originator who will assist you with the process. Also, very important for first time homeowners is to establish how much you qualify for as well as having a plan and thoroughly researching the areas where you intend buying property. Comparing property prices in that area is crucial to establish affordability in terms of rates and taxes.

3. Budget

Setting a budget is another critical step in the process. It's not just about the purchase price; you should also consider ongoing expenses such as maintenance, insurance, Transfer costs are no longer included in the bond, so cash is also crucial to have on hand and property taxes. Hidden costs can catch you off guard, so it's essential not to underestimate them. Remember to factor in additional expenses like closing costs, inspection fees, and potential renovations when planning your budget.

Creating a clear budget will ensure you don't overextend yourself financially and can comfortably manage your new investment.

Extract from Property 24