The Real Cost of Buying a House

Apart from the purchase price, there are several other linked, once-off costs which can come as a nasty surprise...

Article: Piet van der Walt

Related Links

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:

Purchase Price	R 950 000
20% Deposit	R 190 160
Transfer Duty to SARS	R 22 540
Conveyancer Fees & VAT	R 11 400
Postages & Petties & VAT	R 399
Deeds Office Transfer Levy	R 500
Electronic Document Generation Fee	R 111
Deeds Office Search Fee	R 91
Local Council Rate Clearance	R 150

Bank & Bond Cost on	R 760 640
Deeds Office Levy Fee	R 500
Initiation Fee	R 3 612
Attorney Bond Registration Cost	R 6 612
Postages & Petties & VAT	R 285
Electronic Generation Fee	R 111

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.

Are you a home-owner? What extras did you have to pay? Let us know in the box below.

How on earth can the attorneys justify 11000 and 6000 for transfer and bond fees? Can some attorney try and explain to us? What needs to be done, and how long does it take? And don't come with any profession level B/S please.

everyone cashes in when someone takes a bond. It is called greed, and quick easy money. Greeed greeed greeeed greeeeeed. That is why we are faced with this credit dilemma. Everyone wants to make a quick buck off you.

i have just bought a place and paid attorneys fees.. they couldnt even get the spelling of the road name and the complex i bought in correctly. so i really do wonder why they ask for such high fees when they cant get a simple task like spelling correct

In the olden days monthly repayments on a bond used to be around 1/3 of your take-home salary. These days it's closer to 70%, which is why most of us can't afford homes. I noted with interest the other day that the "middle" class individual's net pay is R15,000 per month or more. That's just crazy as it leaves more and more people in the "poor" income bracket, including me :(

Remember that SARS Duties did come down quite a bit a few years back. The true reason for the astronomical house prices is the greed of the sellers market and the gullibility of the buyers. For me it was about R150 000 cheaper to buy new from a developer than a second hand house.

@joey - property is one of the best investments you can make on the long term. especially now when you can bargain on a price, it is worthwhile checking out property. @sarah-ann & piet - i heard the other day from a friend living in the UK that they only apply for a bond ONCE - this bond not attached to property, but rather to the person, ie. when you want to move, you do not need to re-apply for a bond, so those costs are eliminated. which i guess is exactly (like WTF put it so bluntly) why it will never happen here :-(

The high house prices cannot have been driven by seller greed or buyer gullibility as the bank must evaluate a property before they finance a bond. The prices were driven by the banks who were will to hand out 100% bonds on overvalued properties when the going was good. Now the the times are tough the banks do what......

In some countries these fees had been done away with long ago. The Gov should look at generating an electronic form that will be filled by the individuals who wants a house. there after, the bank and the deeds office should do the rest for a small fee. Cut out the crap with these lawyers. They milk everybody dry. Remember the infamous Road Accident Fund? Need I say more.

Lets stop talking about it and investigate - can we do this without an attorney? I have beaten them -: They took 3 months because there were certain documnets outstanding - I acquired them myself within 2 hours ( including sellars bond registration papers ex sellars building society which was out of town) 2nd I signed a deed of sale in which I stated I would pay attorneys cost up and not exceeding R500.00. He exploded! But - sellar said he had to do it. He charged for "postage and petties over and above - which I agreed to pay as obviously his need was greater than mine. I am sorry to say that I have yet to enjoy honesty, integrity, accuracy - or any redeeming trait in any of my dealings with the legal proffesion. Fortunately my dealings have been very limited to date.

SARS makes more money than the attorneys and nobody has a problem with them. I can't believe that you would rather have the transfer done by a bank. they will charge you way more and then transfer your property to the wrong person. The reason conveyancing is so expensive is because nobody wants to deal with government departments. There is so much to conveyancing that there would be choas if it was done in any other way!

short on the heals of these fees( agree that lawyer fees daylight robbery), comes the big M, the constant maintenance fees, which in the long run , if factored in, makes property a bad investment. A home is just a place to live in, it is a very expensive luxury, and like diamonds or art, contrary of what you are told by those in the industry, a very bad financial deal

Just to inform you, the actual electricity and water connection is not R200, but more around R1400 today, the attorney fees are utter madness not to mention the NCA queries that cost around 500 x 2??? clearly a ripoff

A point worth mentioning is that our property prices retrospect to income is still relatively low compared with other countries. ie US, UK. The affordability factor is now under scutiny not just because of general house price increases but overall inflationary adjustments on the cost of living.

My husband and I are in the process of buying a house that was liquidated we honestly got it dirt cheap. The only problem is between the deposit and transfer fees it is close R100 000.00 why don't the banks help first time buyers anymore with a full disclosure amount for the house. It is just very agravating we even have the lawyers who are really a pain in the neck

if you look at all those extra costs involved, it make you sick! To think that we pay our bonds for 20 years when most of the monies are going to attorney's, SARS, conveyancers and other... at least you will have a roof over your head when you are old and grey(hopefully!) why should we have to fill their coffers at our expense????? I say away with all of them and only pay your bond price and a small fee for the transaction! Stop suffocating us like this...

this is so scary, that we can forget about buying a house because as a single parent you dont even earn that much to pay a bond, so government gives the houses for free and yet the people are so unhappy, someone consider the single parents as well cos we are also disadvantaged and aslo need to make a start

If you are selling your place, factor in estate agents fees of 5%. We had to pay costs of R100k when selling our house and buying a new one (purchase price under the R950k 'norm'). The bank we'd been with for 13 years refused to even negotiate less than 20% deposit (and our track record was excellent), so we had to change banks as well. We also had to cash in part of our pension. But it is a buyers market, so if you are planning to buy bigger, now is the itme to do it.

when you buy a house they tell you that you need to save about 10 000 for attorneys, then when you have to sing for the papers they show you another quote for another conveyancers saying its working for the bank, and you need to pay it how is that possible, is it not that the onother conveyocer should be payed by the seller not the purchaser? i mean like at the end of the day it all amounted to about 21 000 is that normal?