Buying a house is probably the most important investment you will ever make, but it can also be a costly business, says Piet van der Walt, Managing Director of Sanlam Home Solutions.
"It is therefore always wise to work it into your overall financial plan before taking the plunge. This way you'll also know first-hand what it is that you can afford."
Van der Walt points out that with the new lending criteria, banks no longer grant 100% mortgages, so buyers need to have a deposit of up to 20% of the purchase price.
Assuming the client can afford a 20% deposit and using Absa's latest Average House Price Index, where buying an average house will cost you R950 800, Van der Walt lists the main costs of buying a house:
||R 950 000
||R 190 160
|Transfer Duty to SARS
||R 22 540
|Conveyancer Fees & VAT
||R 11 400
|Postages & Petties & VAT
|Deeds Office Transfer Levy
|Electronic Document Generation Fee
|Deeds Office Search Fee
|Local Council Rate Clearance
|Bank & Bond Cost on
||R 760 640
|Deeds Office Levy Fee
||R 3 612
|Attorney Bond Registration Cost
||R 6 612
|Postages & Petties & VAT
|Electronic Generation Fee
Don't forget to also budget for the actual move, says Van der Walt. "According to our calculations the cost of moving your furniture within a 100km radius will amount to over R10 000.00."
Another small cost (about R200) to bear in mind is an electricity connection fee.
Monthly expenses that need to be budgeted for include:
Monthly repayments on the bond: At the current interest rate of 13%, the monthly repayment on a bond of R760 640.00 will be R8 911.47.
Bond Monthly Admin Service Fee: R28.50
Home-owner's insurance: Banks normally add this to the mortgage amount to protect themselves against claims for flood, fire and hail damage.
Insurance on the owner's life: This is to cover the cost of the house in case of death. The policy will not only cover the outstanding loan amount to the bank, but will also ensure that at the time of death the home-owner’s dependants have a roof over their heads. Life cover insurance may vary from service provider to service provider, so it would be wise to visit your financial adviser or broker to do a complete financial needs analysis that should include your credit life insurance, suggests Van der Walt.
Rates and taxes: Due to the municipality for rubbish removal and the maintenance of your area. This can be paid monthly or annually.
Electricity and water: Due to the municipality for your monthly consumption of electricity and water.
Van der Walt adds that home-buyers hardly ever think of possible repair costs to their newly-purchased home. An eventuality budget – where you put money aside every month in the case of any eventuality – will come in handy. "This only if you plan your finances wisely in the run-up to the big step".
Van der Walt suggests that potential home-buyers see a qualified financial adviser to help them get started.
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