Purchasing a Home is a Big Financial Commitment. The Once Off Costs Explained.

Purchasing a Home is a Big Financial Commitment. The Once Off Costs Explained.

In today's economy, buying property is not only one of the best investments you can make. It is also one of the most exciting. Property prices and interest rates are the lowest it's been in 50 years, which means now is the best time to snap up a desirable bargain.

Property is the most valuable investment you'll ever make - but with every investment comes costs. That listed price on that sprawling family ocean-view home you saw on that property website is not giving you the full story of how much you will need to cough up when buying that house.

Other than the cost of the property itself, the bond registration and transfer costs-which are unavoidable, there are other costs that you will need to pay before the Deeds Office can approve the sale. To prevent excitement from turning into a tragedy, Tyson Properties takes you through the once-off costs involved so you can better prepare.

1. A Deposit in Hard Cash
A deposit is an amount you should've saved up for as an initial payment for your home. It mentally prepares you for your home repayments, and it ensures that your repayments are manageable. Banks often demand a deposit between 10% and 20% on the purchase price of the property, but this will depend on your credit score. You will pay the deposit to your conveyance attorney who will keep it in a trust account to accrue interest until the transfer takes place.

2. Transfer Duty Tax to SARS
After your deposit, transfer duty is the next big-ticket cost. Transfer Duty, which is payable by you, on any property over R1 million, is a Tax that the Government charges on property transactions. Transfer Duty Tax works on a sliding scale-the higher the value of the property, the higher the percentage of duty payable. As a buyer of an R2 million property, you can expect to pay Transfer Duty of R 50,250.00, of which you must pay upfront to the Transferring Attorney who will then pay it over to SARS on your behalf.

Tip: See SARS website for 2020 transfer duty rates based on property price

3. Transfer Fees: Bond Registration and Transfer of Ownership
Dissimilar to Transfer Duty, Transfer Costs are the legal fees that your Conveyancing Attorney will charge you to register your bond and to transfer the ownership of the property into your name at the Deeds Office. This once-off fee will include registration, ownership, postage, disbursements, and the Deeds Office Levy fees of around R2 500.
These costs vary depending on the value of your home loan, but on a bond of R2 million, you can expect to pay transfer fees of around R 27 600.00.

Tip: See Tyson Property Bond calculator

4. Bond Initiation and Administration Fees
When taking a loan, the bank charges a once-off fee for the initiation and ongoing administration of the bond. It's a fee regulated by the National Credit Act-and set at a maximum of R6 000. Keep in mind that if the bank rejects your loan application, you will still be liable for this fee. Because this fee covers the bank to process your home loan application, you can either pay it upfront or add it to your loan amount.

Tip: Try Tyson Property loan calculator to get an estimation of transfer costs.

Are you financially ready and prepared?

Purchasing property is one of the biggest undertakings and investments you will make in your lifetime and realising the true cost of buying a home will enable you to budget appropriately.