Video: Watch out for property purchasing costs

I was recently speaking to a young woman who had just bought her first house. She admitted that she had been caught completely off guard by all the expenses she had to incur.

She discovered that buying a house is a lot more expensive than just being able to afford the monthly repayment and having a 10% deposit.

These are some of the costs you need to consider:

Transfer costs include conveyancing attorney fees who handle the transfer of ownership from seller to buyer. The total cost will depend on the value of the property.

Bond Registration costs are charged if  you are applying for a mortgage. You pay another set of attorneys – so it’s double the legal fees. There is also a bank initiation fee on the issuing of a new mortgage. Note that you can negotiate the legal fees with the bank.

Transfer duty is a tax paid on properties exceeding R900 000.

Municipal connections and deposits are required by most municipalities to transfer and connect council water and electricity services. These differ between municipalities and needs to form part of your upfront investigation. For example, Johannesburg charges two months deemed usage as a deposit.

There are also moving costs, telephone and Wi-Fi connections: These will all cost extra and may require installation fees.

You can expect to pay an extra 7% of the value of the property on additional expenses. For example on a property of R600 000 your expenses would be around R40 000 and on a property of R1.2 million your total costs would be around R66 000.
Property purchasing costsDon’t let your dream home become a financial nightmare – do your homework first.

12 CommentsLeave a comment

  • Hi Maya

    Any advise on first time “buy to rent” buyers? I am afraid of relying on rental income to subsidize my bond especially during these difficult times but I also want to buy property to rent out specifically on the township market. How do you mitigate the risk of rent default and also how do banks feel about first time buyers buying property to rent it out?

    • When you do the maths assume a 10 month rental income per annum and see if you can afford the mortgage on that basis. This will protect you for at least two months of vacancy.
      There are insurers like Hollard that offer a tenant insurance, so you can look into that. The key is to do a proper credit check and make sure the person is reliable.
      Banks normally only lend based on your existing income (not assuming that you will put in a tenant) but Absa is a bit more flexible on this.
      Watch this interview //www.facebook.com/MayaOnMoney/posts/2932706086825548

  • Dear Maya,

    Thank you, your tips have helped me a lot.
    I have a bond with Bank X with R692,899.00 and 187 Months left at 9.05% (minimum payment of R698.47 monthly payment and I am Paying R9000 a month, which I increase by R500 every year)
    I got an offer from another bank with the following details: Bond R692,899.00 and 120 months period at 9.05% (Minimum payment of R8865.11 and I would still pay R9000 a month and will increase it at R500 annually). They are also offering me a 50% discount on transfer and bond registration cost.

    Do you think it would be wise to take the offer from the new bank or should I stay with my current bank seeing that the only difference between the two is the duration of the bond?

    Many thanks.

  • Hi Maya.
    Great article. What would the purchasing cost be if one were to buy a property cash direct from the property developer?

    Thanks.

  • Dear Madam

    I am just above 50 years. i should have bought a house long ago, but because of working on contract basis which were renewed yearly, for more than 14 years, I was reluctant to buy a house. My concern was that, what if my contract is not renewed. I am tired of renting now, I want to buy a house. Can you advise me?

  • Thank you Maya I didnt know about other things. thank you. Can I also add that you dont pay some of these costs (Municipal costs, bond registration, transfer costs) when you buying a new property from the developer. Instead they (Bank) add a bank inititaion fee to your loan. But I am not sure about transfer duty when a property is more than R900k.

    My question, Is there no way that one can save on these costs.? I am asking this beacuse anything that has to do with attorneys is very expensive. At times we use the middle man even on things that we can do on our own.

    Please correct me where I am wrong.

    Thank you

    • You make a good point about saving when you buy from a developer. The issue of attorney fees is a very important one. It definitely creates “friction” and adds huge costs to property ownership. You can negotiate with the attorney and with the bank on these costs but they are still high. In fact title deeds is seen as one of the best uses for BlockChain technology so hopefully we will get to a point where property ownership is part of a public ledger and not done through attorneys and title deed offices…

      • Good day Maya

        I recently got approved for a home loan, My question relates to transfer cost and Bond registration.

        Can I negotiate all these costs with the conveyancer to be paid monthly on a monthly basis for a certain period?

        Thank you

        • Firstly you can negotiate costs with the bank. I know for example that FNB is offering big discounts to attract customers. There is no reason you could not discuss this with the conveyancer and come to an agreement to pay monthly. It would however be up to them to agree to it.

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