What to look out for: the costs of buying a home in South Africa

Dreaming of owning a home is a significant milestone, but it's important to be well-prepared for the financial responsibilities that come with it.

Purchasing a new property introduces a range of costs beyond the initial purchase price. By understanding the array of costs associated with homeownership - both recurring (such as bond repayments and home loan interest rates), and upfront (such as deposits and property transfer fees) - you can make smart decisions that align with your financial capabilities. Here are some tips of what to include in your financial planning.

1. Add up estimates of your ongoing, monthly home loan and property expenses

When transitioning from renting to homeownership, your financial landscape changes. Alongside your monthly bond instalment, consider these additional ongoing costs:

• Municipal rates: Payable to the municipality, these cover local services and amenities.
• Levies: If your property is in a complex or flat, you'll likely have levies to contribute to communal maintenance.
• Utilities: You'll need to cover electricity and water expenses, which were often included in rent as a tenant.
• Home insurance: Protect your investment with household insurance for your belongings and homeowner's insurance for the building.
• Property repairs and maintenance: From garden care to fixing plumbing issues, maintaining your property comes with costs.

2. Ensure you can cover your home loan transfer fees and other once-off, upfront costs

Beyond the property's purchase price, the following upfront expenses are often part of the homebuying process:

• Transfer duty: Paid to SARS, transfer duty is based on the property's value. Properties under R1 million are exempt from this duty.
• Transfer fees: These go to the transferring attorney for registering the property in your name. They're calculated on a sliding scale related to the purchase price.
• VAT for developers: If purchasing from a developer, VAT is payable instead of transfer duty.
• Bond registration fee: A fee is also charged to register your bond with the Deeds Office.
• Additional attorney costs: These smaller variable costs include FICA fees, electronic instruction fees, and postage. Typically, they amount to around R2,200.

3. Make sure you get your finances in order

Ensuring your finances are in order before applying for a home loan is essential.

• Maintain good credit: Lenders review your credit history when assessing your home loan application, so paying your bills in time will score you a strong credit rating.
• Reduce your debts: Clearing existing debts before applying for a home loan greatly improves the chance that you'll qualify for a loan.
• Chat with a trusted financial professional: Consulting with a financial planner or adviser is always a good idea before making a big money decision. These professionals can consider your financial situation more objectively and holistically, and guide you towards a more informed decision.

Enjoy the perks of pre-approval

Seeking home loan pre-approval from a lender like Discovery Bank provides a clear picture of your borrowing capacity. While pre-approval for a home loan doesn't guarantee a property loan, it enhances your credibility as a buyer. Use the 'Payment to Income' (PTI) ratio as a guide - your monthly bond instalment should not exceed 25% to 30% of your combined family income.

Owning a home in South Africa is within reach when you approach it with a clear understanding of its financial implications. Use all the bond calculator tools and resources available to you to calculate your potential mortgage and monthly home loan payments, and take confident steps toward securing your ideal property!