When you are buying a home, there are several things you need to think about regarding its financing. The most important aspect is that of arranging a loan from a bank or a financial institution to pay for your home. The main cost which you will incur if you take a home loan is the interest rate. This is the cost you pay the bank for borrowing the money. In addition to the interest you pay to the bank, there are several other costs that you incur when availing a home loan. Here is a brief guide on some of them.
Initial Deposit Money
When you take a home loan from any bank, you will be asked to pay initial deposit money for it. The amount of deposit that you will be asked to pay will depend on twin factors of the total amount of money you borrow and your overall financial status.
Bond Costs and Transfer Fees
When you buy a new home, you have to pay tax to the receiver of revenue for buying the property and having it registered in your name. In case you purchase a piece of land, then only a transfer duty needs to be paid on the value of that land. If you are moving into an existing house, you will need to pay transfer duty on the value of the land and the building.
If an individual buys a home he/she will have no duty fees on the first R190 000 of the purchasing price. When the amount is R190 001 to R330 000 then the individual will have to pay 5 % of the purchasing price. When the purchasing price exceeds R330 000 then another 8 % has to be paid.
If you buy a property in the name of a close corporation, a company or a trust then you will be charged a fee of 10% on the purchasing price.
This is in case you move into your new home before the registration process is complete. In such a situation, you will have to pay the occupational rent to the seller till such time as the bond has been registered.
Services and other Fees
This is the attorney’s fees (called ‘conveyance fees’) that you pay to get the house registered in your name. Then there is also the charge that you have to pay to the deeds office to register and transfer a property in your name. Of course the amount you pay will depend upon the purchase price of the property and on the size of your bond. Other costs include municipal rates paid to the local authority.
These include valuation fee, interim interest and bond initiation fee. A valuation fee is basically given to a property inspector or valuer who assesses the value of the property and ascertains if its value is in accordance with the loan amount applied for. Similarly, a bond initiation fee is charged by the bank as a one time payment for administrative costs. Then you might want to avail of a home insurance before registering the home loan. In fact, some banks even insist upon this as a prerequisite condition for taking the loan. The other kind of insurance that banks may insist upon a borrower is a life insurance. This is basically an added protection to the borrower’s family in case of an unforseen eventuality during the loan period.
When you buy a house then one of the first things you should do is to take out household insurance. If you don’t then you will not be compensated for any losses, should something unexpected happens
It is a good idea to be aware of all these costs in totality before you venture into the market to secure a home loan. This way you can plan your situation in a better manner and can handle the situation more comfortably.