The Cost of Buying a Property

There are a number of “hidden” costs that need to be taken into consideration when buying property.

Generally the seller will appoint the transfer attorney, and the financial institution that grants your bond will appoint the conveyancer who will register your bond. However it is the buyer that has to pay for both the transfer and the bond registration costs. These will make up the bulk of what you have to pay, however there are several other smaller costs that also come into play.

Transfer Costs.

Transfer duty or transfer costs are Government levies on property transactions. The tax is paid when a property is transferred into your name. When you buy vacant land, you will pay transfer duty on the value of the land only, but if you buy an existing home the transfer duty is based on the value of the land and the building.

If properties are bought in the name of a close corporation, company or a trust, you will be charged a transfer duty of 10% of the purchase price. If you buy a property from a developer who is registered for VAT, you will pay VAT rather than the transfer duty on the purchase price this is sometimes however already figured into the selling price. Otherwise transfer costs are charged on a sliding scale depending on the purchase price of the property. The more expensive a property is the higher the transfer costs will be.

According to the price of the property, the transfer cost is as follows:

• Below R 500 000.00 - no transfer duty.
• Between R 500 000.00 and 1 Million - A flat Rate of R 25 000.00
• Over 1 Million - R 25 000.00 + 8%
• Companies/Trusts/CC - Pay a flat rate of 10%.

Conveyancing fees.

The attorneys that are responsible for having the property registered in your name have to be paid for their services. Fees charged by conveyancers are governed by the law society. Conveyancing fees are higher the more expensive the property is. In addition, conveyancers charge about R200 (excluding VAT) for postage and sundry expenses they incur during the registration process.

Deeds Office levy

The Deeds Offices are responsible for the registration of ownership of property and other immovable property rights.
Deeds Office levies were introduced in 1994, and are based on a sliding scale depending on the purchase price of the property. Deeds office levy costs are as follows:

• Up to R60 000, the fee is R55
• Between R60 001 and R150 000, the fee is R200
• Between R150 001 and R300 000, the fee is R260
• Between R300 001 and R500 000, the fee is R340
• Between R500 001 and R1 million, the fee is R400
• Over R1 million, the fee is R500.

The fee is paid to the Deeds Office when the transfer documents are lodged.

Municipal rates

Transfer of a property cannot take place until any rates due to the local municipality have been paid in full. Sellers are only liable for rates for the time in which they occupy the property. The remainder must be paid by the buyer.
The buyer will also be charged for a rates clearance certificate which the municipalities charge a fee of about R30 for.
If you are buying a sectional title unit, the conveyancer has to obtain a clearance certificate from the body corporate confirming that the seller is up to date with his or her levies. This certificate costs around R250.

Bond Registration Costs

If you take out a bond to finance the purchase of a property, you will have to pay to have a mortgage bond registered on that property.

Conveyancing fees (bond).

The conveyancer handling the registration of your mortgage bond also has a fee. These fees are based on tariffs recommended by the Law Society of South Africa, but it can be possible to negotiate a lower fee.
The Law Society governs the tariffs that conveyancers may charge for bond registration fees. The fees work on a sliding scale based on the puchase price of the property.There is also an additional charge of around R200 (excluding VAT) for postage and petties.

Deeds Office levy

The Deeds Office has a levy to cover administration costs when a bond is registered on a property. The fee is based upon the bond amount being registered. The costs are as follows:

• Up to R150 000, the fee is R200
• Between R150 001 and R300 000, the fee is R260
• Between R300 001 and R500 000, the fee is R340
• Between R500 001 and R1 million, the fee is R400
• Over R1 million, the fee is R500.

The fee is paid to the Deeds Office when your bond is registered.

Deed of suretyship

In some instances before a bank will grant a mortgage bond they may require a deed of suretyship. If the bank doubts that an individual will be able to repay their loan they will require that someone else signs surety for it. This means that that person will take responsibility for the loan if repayments fail. The banks will charge between R100 and R150 to have a conveyancer draft the deed of suretyship

Bank Charges

There are also administrative costs charged by the banks that have to be accounted for.

Interim interest

On the day the bond is registered and the bank releases the loan amount it charges pro rata interest from then up until the day on which the first bond installment is due. This is called interim interest and it is normally added to the loan amount, but you can settle it immediately after the loan has been released.

Bond initiation fee

Banks sometimes charge a once off administration fee to cover their costs when setting up the bond.

Administration fee

Once your loan has been granted, the bank charges you a standard monthly administration fee on your bond account. This is usually added to your monthly installment, and will be reflected as a separate item on your statement.

Valuation fee

When you apply for a bond, the bank will appoint an assessor to investigate whether the property has sufficient value compared to the loan amount applied for. You will be charged a fee of up to R1000 to cover the costs of the valuation.

Sectional title insurance certificate

When you buy into a sectional title scheme, you buy a unit that is exclusively your property, as well as a share in the common, shared property of the scheme.
Banks may request to see a certificate which proves that the sectional title scheme is covered by an insurance policy issued by a recognized insurer. This certificate can be obtained from the insurance company with which the body corporate has taken out the policy. The certificate costs around R110

Ongoing Costs

Home loan repayments

Your installment falls due every month. Find out from your bank which date your installment is due on. It is always recommended that you pay your monthly installment by direct debit.

Homeowner’s insurance

When a bank grants you a loan, it will insist that you insure the structure of your house against fire and storm damage. This is because the house serves as the bank’s security for your loan.
The bank often adds the annual total of your premiums to your home loan, and you pay off the total in monthly installments.

Household contents insurance

Household insurance covers the contents of your house, such as your furniture and appliances against loss or damage. It is not however a mandatory condition of the banks for you to get household insurance.

Municipal rates and services

Your local Municipality charges rates to pay for municipal services. The rates you pay go towards such things as:

• Road works
• Maintaining parks and public areas
• The sewerage system,
• Rubbish removal
• street lighting.

Although rates are usually payable annually, you can arrange to pay in monthly instalments.
Services such as electricity and water are a separate cost where you are charged according to your household consumption.

Life assurance or mortgage protection insurance

Banks sometimes require that you take out a policy that will cover your bond repayments in the event of your death. If you already have existing life cover then you may not have to take out a new policy if the bank will allow you to cede the existing one to them as insurance.