The major initial capital outlay involved in buying a home is the difference (unless the purchaser qualifies for a 100% bond) between the price of the property and the mortgage loan granted. The buyer is then required to put down a deposit. However, there are a number of other amounts which represent a significant cash outlay when added together, and are often overlooked by the would-be home buyer. Among the immediate supplementary, the prospective buyer should have to take into account:
Insurance (Non-Sectional Title): The building & improvements must be insured through the bank with an insurance company for their full replacement value. This will cover damage against which the property is ordinarily insured and such risk as the bank may decide, the monthly premium being automatically debited to the loan account.
Bond Insurance: You may be asked to take cover or cede an existing policy to protect the bond. This is normally a life insurance policy (which can be included in the monthly bond repayment) guaranteeing repayment of the loan in full in the event of the mortgagee’s death. This value is based on replacement value and not the leading value or the assessed value.
Occupational Interest: The buyer pays the seller for the convenience of taking occupation before transfer is affected. This is usually calculated on a pro-rata basis, according to days occupied, but paid as a monthly rate to the transferring attorneys. This fee is normally lower than the average rental as transfer could be effected before the seller vacates and he is then responsible for rental and should, however, cover the monthly bond repayments of the purchaser or seller, whichever is applicable.
Portion of Rates: The seller is entitled to the unexpired portion of the rates he has paid to the local authority (due in advance, not arrears). For example, if transfer is taken in the middle of the municipality’s year, the purchaser is liable for half the amount paid. The buyer is advised to ask to see a monthly municipal account to assess what the monthly fees are going to be.
Moving In: Electricity and water connection fees – where a meter exists, the deposit on reconnection is an average monthly account times two. Telephone connection and transfer fees. Spin-off costs such as furnishings, sundries and contingencies depend on each individual transaction and all the above figures will vary from the one suburb to another.
Registration of Transfer: The attorney’s fee for transferring legal title to you is calculated according to a sliding scale based on the price of the property.
Transfer Duty: Transfer to the name of a natural person, Companies, Close Corporations or a Trust are calculated at the same rate since 23 February 2011. Transfer duty is the largest single expenditure besides the purchase price and is calculated according to a formula. The first R750,000 is exempted. This amount is collected by the transferring attorney and is paid to the Receiver of Revenue.
Bond Registration Costs: These are based on the size of the bond and not the purchase price. A point to remember is that financial institutions normally register an additional sum as a contingency measure – ask about this.
Financial Institutions’ Initiation Fees: See table below