Preparation: Hidden and not-so-hidden costs of buying a house
Wouldn’t it be lovely if the price tag on your new home was all you had to pay? In reality, there are several hidden and not-so-hidden costs associated with buying property. Here are some of the major expenses, to help you prepare.
The cost of buying a house: Expenses you should prepare for
Buying a home is the single biggest financial commitment and investment that most people will make in their lifetime. But there are a lot of other expenses to factor in, and it’s worth planning for these in advance of transfer so that you can be sure you have the funds in place.
The following expenses should be planned for:
1. Bond registration and transfer costs
These are probably the biggest cost associated with buying a property that home buyers must be aware of and budget for. They are also unavoidable. You can work out the fees on properties you’re considering by using a bond transfer calculator.
But to give you an idea, with a R1 200 000 bond, for a freehold property, with the seller not VAT registered, and the purchase being conducted by a natural person (ie you’re not buying the property as a trust or company), the bond registration cost estimate would be R31 618 (incl. VAT) and the transfer cost estimate would be R31 580 (incl. VAT). Note, these costs are an estimate, and include the bank initiation fee, which other calculators may not include. You should also take into account deeds office fees of approximately R1220, and other fees that may be charged by attorneys at their discretion.
Banks may not necessarily grant 100% finance which will require the buyer to pay a deposit, and currently only in select instances will some of the banks incorporate the costs of transfer, so make sure that you have the funds available for this vital part of the home-buying process.
2. Moving costs
You’ve bought the place; now you’re going to have to move in. Depending on where you’ve been living, and how much furniture you already own, you might have to hire a moving company to get you into your new home. It is advisable to obtain a couple of quotes to compare the costs and determine the insurance cover provided for your possessions whilst in transit.
The costs can be anywhere between R5 000 and R15 000 in the same city, but most companies offer a discount if you move in the week and in the middle of the month, when demand is lower. You can also investigate mini movers or bakkie-for-hire options, which would be cheaper, but perhaps a bit more work for you.
3. General repairs and maintenance
While some homes are in perfect condition on the day of transfer, chances are you’ll have to do some cleaning, repainting and general repairs to make yours feel more like home. Some of these will be essential, others will relate to your own personal taste or budget.
You should definitely set aside some cash for unforeseen expenses. Try to gain access to the property ahead of moving in, so that you can write up a realistic budget for what you will need to spend.
You should also set aside a few hundred rand for all the basic household maintenance items you will need, like detergents, brooms, cloths and polish. It is helpful to have a few spare light bulbs ready in case you need to replace old ones as well. Don’t forget that houses need ongoing maintenance, so always keep some cash ready for unexpected expenses.
4. Getting the utilities in
If you are buying a freehold property (not a sectional title), you will need to register for your water and electricity connection, and your telephone and internet lines if you need those. These costs vary from area to area, and the internet fee will depend on the type of connection that you want and whether the relevant lines are already installed.
Generally speaking, put aside around R1 000 to R3 000 for connecting the electricity, water and telephone – but you may be required to put down a deposit with the telephone company as well, depending on your credit profile. Investigate the different internet connection costs with your service provider.
And obviously, once those services are connected, you will have to pay for them every month.
5. Rates and levies
If you have purchased a freehold property, you will have to pay rates and taxes, which can be anywhere from a couple of hundred to a few thousand rand per month, depending on the value of your property and the area. Rates cover sewerage usage and garbage removal, while your taxes are calculated against the value of your property. The estate agent should have included these rates in the information about the property when you were house hunting, but if you need to find out, you can ask the municipality representative when you register for water and electricity. These rates will stay the same every month.
If you have bought into a sectional title, the apartment block’s body corporate will have set a levy to pay every month for the general upkeep of the buildings.
Some suburbs have additional levies that are charged for a street security guard or boom operator. While these are sometimes voluntary, if you benefit from the arrangement, it’s good to contribute.
When buying a new home, it’s a good idea to assess the security of the other houses in the area and find out about the crime rates from the local police station, and then update your own security accordingly. And you’ll have to budget for a monthly armed response fee as well.
“Many security companies offer a package deal on installation with a contract for a certain term. Be sure that you’re happy with the length of the commitment before signing a deal like this, but it can be a very cost-effective way to get a good security system in place.”
Your bank will insist that you have homeowners’ insurance in place to cover any structural damage to the property. This is generally affordable with competitive options available to you. However, your possessions are not covered by this insurance, so it’s a good idea to explore the costs of an additional policy to cover you for theft.
We also caution that if you have existing insurance cover, you must inform your broker of your new address as this can change the risk factors in your policy and alter your premiums.
8. Furniture and electronics
Once you have a home, you will want to fill it with beautiful things. Of course, this kind of refurbishment is a luxury, and one that can be put off until you have settled in. However, if there are any items that are vital to making your life in your new home comfortable, then get a costing on these and factor them into your budget.
Making the home-buying process easier…
Owning a new home is liberating, but the financial commitment can feel like a burden. “With forethought and planning, you can budget for the major expenses that are likely to come your way, which will give you a bit of control and confidence as you settle into your new home.”