The real cost of buying a house

Buying a house is probably the most important investment you will ever make. Apart from the purchase price of the house, there are several other linked, once-off costs which, if you have not budgeted for them, can come as a nasty surprise, it is 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, keeping in mind that the banks no longer grant 100% mortgages, so buyers need to have a deposit of up to 20% of the purchase price and the buyer also has to pay the costs of registration.

Below please find an example of the costs involved in buying a house for R1 million and the a house for R500,000 - please note that these are only approximate costs.

Example 1: Purchase Price of R 1,000,000
20% Deposit R 200,000

Transfer Costs
1. Transfer Duty to SARS R 25,000
2. Conveyancer Fees R 10,000
3. Postages & Petties R 425
4. Deeds Office Transfer Levy R 500
5. Electronic Document Generation Fee R 111
6. Deeds Office Search Fee R 91
7. Local Council Rate Clearance R 150
8. FICA R 400
9. VAT R 1,500
= Total Transfer Costs (approx) R 238,177

Bank & Bond Cost on a R 800,000 bond
1. Deeds Office Levy Fee R 500
2. FICA R 300
3. Attorney Bond Registration Cost R 5,800
4. Postages & Petties R 325
5. Electronic Generation Fee R 111
6. VAT R 900
= Bond Registration Costs (approx) R7,936

Total costs (approx) R 246,113

Example 2: Purchase Price of R 500,000
10% Deposit R 50,000

Transfer Costs
1. Transfer Duty to SARS R 0
2. Conveyancer Fees R 6,000
3. Postages & Petties R 425
4. Deeds Office Transfer Levy R 400
5. Electronic Document Generation Fee R 111
6. Deeds Office Search Fee R 91
7. Local Council Rate Clearance R 150
8. FICA R 400
9. VAT R 900
= Total Transfer Costs (approx) R 8,477

Bank & Bond Cost on a R 400,000 bond
1. Deeds Office Levy Fee R 340
2. FICA R 300
3. Attorney Bond Registration Cost R 3,400
4. Postages & Petties R 325
5. Electronic Generation Fee R 111
6. VAT R 580
= Bond Registration Costs (approx) R1,656

Total costs (approx) R 60,133

Other Costs
Next you need to budget for the physical move, on average the cost of moving your furniture within a 100km radius will amount to around R10,000. Another small cost to bear in mind is an electricity connection/registration fee.

Monthly expenses that need to be budgeted for include:
1. Monthly repayments on the bond: At the current interest rate of 12%, the monthly repayment on a bond of R800,000 will be around R8,800 pm or on a bond of R400,000 will be around R5,000 pm.
2. Bond Monthly Admin Service Fee: R30.
3. Home-owner’s insurance: Banks normally add this to the mortgage amount to protect themselves against claims for flood, fire and hail damage.
4. 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.
5. Rates and taxes: Due to the municipality for rubbish removal and the maintenance of your area.
6. Electricity and water: Due to the municipality for your monthly consumption of electricity and water.
7. Monthly Levy: In the case of a sectional title, fractional title, share block or life rights scheme.