Home finance explained to first-time homebuyers
When purchasing any property, there are a plethora of related expenses of which first-time buyers are often unaware.
The number of first-time buyers entering the property market has increased significantly thanks to the historically low interest rates. When applying for home finance for the first time, buyers should take time to understand all the costs involved before they commit themselves to a set of expenses they cannot truly afford.
“When purchasing any property, there are a plethora of related expenses of which first-time buyers are often unaware. These expenses take the form of upfront, once-off fees such as bond registration and transfer costs, as well as ongoing monthly expenses such as life and disability cover, levies, municipal rates, and taxes.
“Buyers need to have a full picture of all these expenses before starting the house-hunting process as this will affect the size of the home loan they can afford,” explains Adrian Goslett, regional director and CEO of RE/MAX.
With regards to the latter set of monthly expenses, Goslett points buyers to the details listed on property portals. “Most listings will provide details of how much the levies, municipal rates and taxes will be on that particular home. Buyers can also ask the real estate agent if these details are not available online.”
“Life cover is another mandatory monthly expense that most financial institutions require in order to grant buyers a home loan. Each bank has their own lending requirements when it comes to life insurance policies. Instead of having to do the research themselves, BetterBond can advise buyers about the various prerequisites involved when applying for a home loan,” Goslett suggests.
Buyers can also get a good idea of what the upfront bond registration and transfer costs will be by looking at the ‘bond and transfer’ calculator on BetterBond’s website.
This calculator describes all the various costs involved, which include:
• Bond registration costs are the fees charged by the attorney to register the title deed of the property into the new owner’s name.
• Transfer deeds office fees cover the cost for the deeds office to transfer the title deed into the new owner’s name. There are additional deeds office fees payable based on the bond amount.
• The bank initiation fee is charged by the bank to open the buyer’s home loan facility.
• Unless the property is valued under R1-million, transfer duty is payable to SARS over and above the purchase price (visit the SARS website to find a full breakdown of these costs).
• Property transfer costs are payable to the transferring attorney for his/ her work in transferring the property into the buyer’s name.
• All other costs involved during the bond registration and transfer process are labelled as ‘post, petties FICA, other fees’. These include things such as cost of telephone calls, postage, courier, administrative costs, and bank charges.
There are lots of unknown variables when buying a home for the first time.
“Buyers should never feel embarrassed or shy to ask questions. The home buying process is not taught in school and most homeowners only learn these things through first-hand experience. Buyers should always feel comfortable to speak to the professionals as they are there to help make the whole process easier,” Goslett concludes.
