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Home Loan Costs
Transfer duties are not the only things that make the process of purchasing a home expensive. When buying a home you also have to contend with the fees levied by the conveyance attorneys and your bank, as well as a whole bunch of other sundry costs that are likely to pop up before you can finally call yourself ‘The New Owner’.
We shed some light on all of the bits and pieces that will finally make up your total home loan costs: transfer costs, bond costs and sundry expenses
Transfer costs*
Transferring the property from the current owner to you, involves three parties (SARS, the conveyance attorneys and the Deeds Office) and five costs: transfer duty, VAT, conveyance fees, Deeds Office registration fees, post and petty charges. You will be required to provide the money to cover these costs to your conveyance attorney who will in turn disburse the appropriate amounts to SARS, the Deeds Office and themselves.
1. Transfer duties: The amount of duties you have to pay SARS will depend on the purchase price of the property. If the property cost R 500,000 or less, it is exempt from transfer duties; if it cost between R 500,001 and R 1,000,000 the duty payable is 5% on the value above R500,000; and if above R 1,000,001 and more, the duties applied will be 8% on the value above R 1,000,001 plus and additional R 25,000.
2. Conveyance fees: The conveyance fees you stand to pay depend on who the conveyance attorney is and how much the property costs. The conveyance attorneys’ rates are generally between 0.7% and 1.2% of the price of the house.
3· Deeds Office fee: The fee levied by the Deeds Office to register the deed to the property in your name, depends on the value of the property, and starts at R 55 per registration.
4· Post and Petty charges: These are incidental expenses that are quite difficult to predict. You can budget for anything between R 250.00 and R 500.00.
5· VAT: 14% will apply to the conveyance fees and the post and petty charges.
Example
On a R 1,000,000 property, the transfer costs will be as follows:
Transfer Duties - R 25,000.00
Conveyance fees - R 10,000.00
Deeds Office - R 400.00
Post and Petty Charges - R 250.00
VAT - R 1,435.00
Total Transfer Costs - R 37,085.00
Bond Costs*
There are four parties (the bank, SARS, the conveyance attorneys and the Deeds Office) to whom five different bond related disbursements have to be made: conveyance fees, Deeds Office registration fees, post and petty charges, VAT and an initiation fee. With the exception of the initiation fee, which you will pay directly to the bank, you will be required to provide money to cover the remaining costs to your conveyance attorney who will, in turn, disburse the appropriate amounts to SARS, the Deeds Office and themselves.
1· Conveyance fees: The conveyance fees you stand to pay depend on who the conveyance attorney is and the size of your bond. The conveyance attorneys’ rates are generally between 0.7% and 1.2% of the size of your bond.
2· Deeds Office registration fees: The fee you have to pay to the Deeds Office to register your bond depends on the size of your bond. Their fee structure works on a sliding scale, starting at R 200.00 per registration.
3· Post and Petty charges: These are incidental expenses that are quite difficult to predict. You can budget for anything between R 250.00 and R 500.00
4· VAT: 14% will apply to the conveyance fees and the post and petty charges.
5· Initiation Fee: The initiation fee is a once-off administrative expense, which differs from one bank to the next. The maximum amount chargeable is usually capped, so a budget of R 4,500 should be ample.
Example
On a R 1,000,000 home loan, the bond costs will be as follows:
Conveyance fees - R 7,000.00
Deeds Office fees - R 400.00
Post and petty charges - R 250.00
VAT - R 1,015.00
Initiation fee - R 4,250.00
Total Bond Costs - R 12,915.00
Sundry Expenses
Although the sundry expenses involved in finalising your property transaction are relatively small, it is good to budget for these in advance. These could include the documentation you need for FICA, and levy certificates. The Act on Local Government Municipal Services of 2004 allows municipalities to request 6 months’ worth of rates and taxes upfront before a clearance certificate is issued to the seller for property transfer purposes. If this is the case, you will need to reimburse the seller in respect of this payment.
*Based on the Absa home loan calculator.
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