Want to know about the estimated costs of buying a house In South Africa? It is important that you are aware of the registration and transfer fees involved in the home buying process. Below is a breakdown of the cost of buying a house in South Africa.
At a glance
What is the cost of buying a house in South Africa?
● Deposit
● Conveyancer’s Fee (for bond registration and property transfer)
● Sundries, Postage and Petties (for bond registration and property transfer)
● Deeds Office Registry Fees (for bond registration and property transfer)
● Home Loan Initiation Fee
● Administration Fee
● Homeowner's Insurance
● Home Loan Protection Assurance
● Municipal Provision for Rates and Taxes
● Moving Costs
● Telephone/Web Connection & Deposit
● Water & Electricity Deposit
● Occupational Rent
Optional costs
● Deposit
A deposit is the initial payment you make to secure the purchase of your property. Your deposit is not meant to cover the extra costs involved in purchasing property such as bond fees, transfer duty, attorneys costs.
The amount of your deposit depends partially on how much money you have available to put down. A deposit of 10% was considered sufficient, however, in recent years, the banks have changed their lending criteria and you may not be able to obtain bank finance without a deposit of at least 20 - 30% of the purchase price. It's advisable to try and pay in as much as possible since the bigger the deposit, the smaller the home loan repayment will be.
It is paid as an upfront fee to the transferring attorneys. They will keep the deposit in an interest-bearing trust account until the day your bond is registered and the property is transferred into your name.
The money is then paid over to the bank or directly to the seller if you are not taking out a home loan to purchase the property. The interest accrued on this amount while being in the trust account, is paid back to you.
Bond registration costs
● Conveyancer's fee for bond registration
Conveyancer's fees are charged by registration attorneys to get your bond registered over the title deeds. The amount varies according to your home loan amount. The fee is based on tariffs recommended by the Law Society, but may differ slightly from one law firm to another.
These fees are paid to the registering (bond) attorneys before registration of your bond.
● Sundries / postage & petties for bond registration
The registering (bond) attorneys charge a levy to cover small things like posting documents to other conveyancers, the bank, the estate agent, the Deeds Office, and to you. The amount is usually fixed and each law firm has its own rates. The fees are due to the registering (bond) attorneys prior to bond registration.
● Deeds Office Registry Fee
This fee is charged by the Deeds Office for the legal registration of your mortgage bond. This is a fixed amount calculated on the value of your home loan. For example, if your home loan is R 150 000.00 and below, the fee is R 310.00. Or, if your home loan is between R 600 000.01 and R 800 000.00, the required fee fee is R 700.00. Buyers can make payments to the registering (bond) attorneys before the bond is registered. The money is then paid to the Deeds Office.
READ MORE: The cost of buying property
Property Transfer Costs
● Transfer Duty
Transfer duty is a government tax charged on property that is transferred from the seller's name into the buyer's name. It generally constitutes the major portion of the costs involved. If the seller is registered as a VAT vendor, no transfer duty is payable. In such a case, the seller must have included VAT in the purchase price. This is usually the case when buying property in a new development – the developer is generally VAT registered.
The transfer duty rates applicable have changed as per the 2017 budget. Click on this link to access all the updated transfer duty rates applicable on property acquired on or after 1 March 2017.
No transfer duty is payable if the transaction is subject to VAT. The fees must be paid to the transferring attorneys before homeownership changes. The money will then go the South African Revenue Services (SARS).
No transfer duty is payable if the transaction is subjected to VAT. Transfer duty is also applicable when a buyer resells a property prior to the transfer of property. A purchaser who buys property on behalf of a someone else must submit a nomination within 24 hours if they want to avoid paying transfer duty.
● Conveyancer’s Fee for transfer of property
Transferring conveyancer's fees are paid for the service the transferring attorneys provide to transfer ownership of a property and to get the property registered in your name. The amount varies according to the purchase price of the property. The fee is based on tariffs recommended by the Law Society, but may differ slightly from one law firm to another. Attorney’s Fees are always subject to VAT being added. Conveyance fees are due before transfer of the property and must be paid directly to the transferring attorneys.
● Sundries / Postage and Petties for transfer of property
The transferring attorneys charge a fee to cover small things like posting documents to other conveyancers, the bank, the estate agent, the Deeds Office, and to you. The amount is usually fixed and each law firm has its own rates, Attorney fees are always subject to VAT being added. These levies are payable to the transferring attorneys before transfer of the property.
● Deeds Office Registry Fee
This fee is charged by the Deeds Office for the title deed, legal transfer and registration of the property home into your name. It is a fixed amount based on the value of your home loan. For example, on a bond under R 100 000.00 and below the fee can be R 35.00. And, for a bond of between R 600 000.01 and R 800 000.00 the fee will be R 815.00.
It is an upfront fee, payable before transfer of the property. The transferring attorneys receive the money and transfer it to the Deeds Office.
Initial Home Loan Charges
● Home Loan Initiation Fee
A home loan initiation fee is charged by the bank for processing of the home loan application. You will need to pay the home loan initiation fee even if the home loan is rejected by the bank. Some banks work on a base fee plus a percentage of the loan amount, while other banks charge a flat rate. But, the maximum initiation fee charged will not exceed R 5 985.00 (Including VAT). It will be in your best interest to budget for this amount.
It is a once-off fee payable upon registration of your bond. The amount will most likely be debited to your home loan account or added to your outstanding balance.
Ongoing Home Loan Charges
● Administration Fee
An administration fee is charged by the bank for administering the home loan account. You can expect to pay anywhere between R 40.00 and R 60.00 per month, depending on whether you have taken out the bank’s in-house homeowners insurance. The service fee may be reduced if you make use of the bank’s insurance. The amount will most likely be debited to your home loan account.
● Homeowner's Insurance
The bank will insist that you take out a homeowner's insurance policy to cover the property and the permanent structures on it against natural disasters such as fire or storm damage. The amount will vary depending on the value of your property and will likely be debited to your home loan account by the insurance company.
● Home Loan Protection Assurance
If you don't already have a life assurance policy to cede as security, you need to take out home loan protection assurance against death only, disability only, retrenchment only, death and disability, death and retrenchment, disability and retrenchment, or death, disability & retrenchment.
The amount depends on the outstanding balance of your home loan and will most likely be debited from your home loan account. Depending on the home loan package, some of the options mentioned above can be absorbed into the mortgage loan. Speak to your banker or financial adviser for more information and to double check these costs.
Other Initial Costs for Buying Property
● Municipal Provision for Rates and Taxes
This charge covers all rates and taxes that need to be paid in advance by the buyer. The amount payable for rates and taxes vary from one local authority and is calculated according to the valuation of the property. But, you can expect to pay roughly R 5 000.00 per property. It is a once-off fee that must be paid to the transferring attorneys or directly to the local authority.
Once-off Costs
● Moving Costs The removal company will charge a once-off fee for the removal of household goods. Contact the removal company for a quotation.
● Telephone/Web Connection & Deposit Contact a Telkom Office or other service providers near you for their rates.
● Water & Electricity Deposit Contact your local municipality to find out what the amount is.
Other ongoing costs
● Occupational Interest (Occupational Rent)
Occupational interest is payable if you take occupation of the property before the actual transfer of the property into your name. The amount of occupational interest due to the seller should be stipulated in the ‘Offer to Purchase’ agreement.
It can be a fixed amount, usually calculated as either the amount of the seller's mortgage loan repayment on the property or 1% of the purchase price. Or, it can be subjected to an escalation if registration of transfer has not taken place within a certain period (this may apply when the occupational interest amount is less than the seller's bond repayments).
The money is paid monthly in advance, to either the estate agent or the registering (bond) attorneys, or directly to the seller.
Once you know and understand all the different fees involved with the sale of a property, you'll have a much better grasp of the home buying process. The cost of buying a house in South Africa can be overwhelming but fortunately you can get a head start on your budget by taking advantage of Private Property’s bond calculator and affordability calculator.
