What does it really cost to buy a house?

To be fully prepared financially to buy a house, you need to know what extra costs you'll incur besides just the price tag of your new property. It helps to have some additional finance set aside to cover these costs. They include:

• Transfer costs
• Conveyancing fees
• Deeds office fees
• Required extras

Transfer costs

What are transfer costs? You might be dismayed to learn that they are a form of tax, levied by the Government. Each time a property is bought, the simple act of the transfer of ownership attracts a transfer duty, payable to the Government. This kind of tax dates right back to the United Kingdom's tax laws of the late 1600's and, needless to say, there is hardly a government in the world that hasn't adopted the system in some way since then. However, the law pertaining to South Africa's transfer duties changed on 1 March 2006 and, under the new structure, transfer costs are lower than before.

Under the new structure, you will pay the following transfer costs:

• If the property costs R500 000 or less, no transfer duty is payable.
  
• If the property costs between R 500 001 and R1 000 000, R 25 000 transfer duty is payable.
  
• Properties above R1 000 000 attract R 25 000 for the first million, plus 8% of the amount after the first million in transfer duty. (For example, if the purchase price of the property is R1.5 million you will pay R 25 000 for the first million, plus R40 000, which is 8% of R500 000.)

These rates apply if you are buying the property in your personal capacity. If you buy the property in the name of a close corporation, company or a trust, you will be charged a transfer duty of 10% of the purchase price. This is an important point to note if you are wondering in what capacity to buy a house. Note too that if you buy a property from a developer who is registered for VAT, you will pay VAT rather than the transfer duty on the purchase price.

Conveyancer's fees

Conveyancing describes the legal process whereby a person, company, close corporation or trust becomes the registered and lawful owner of fixed property and ensures that such ownership cannot be challenged. It also includes the process of the registration of mortgage bonds.

A conveyancer is an attorney who by law is the only person who can register fixed property transfers. This ensures the protection of the various interests the parties have in the transaction and maintains the high standard of land registration.

The Law Society has recommended tariffs that conveyancers may charge to transfer property into your name and register your bond. The fees are determined using a sliding scale (the higher the purchase price, the higher the fee). They usually work out to between 1% and 2% of the purchase price, and will add a few thousand rand to your home-buying budget. In addition they charge about R 250 for postage and sundry expenses.

Deeds Office levies and fees

Fees payable to the Deeds Office will add a few hundred rand to your expenses incurred in buying a house. The Deeds Office is a government office that falls under the Department of Land Affairs. There are branches nationwide and they are responsible for the registration of ownership and other rights in immovable property.

To lodge your transfer documents at the Deeds Office will cost R500 for a house between R1 000 001 and R 2 000 000. A Deeds Office levy is also charged on the registration of a mortgage bond, again on a sliding scale. A mortgage bond of between R1 000 001 and R 2 000 000 will attract a R500 levy.

Required extras

Here is a list of some additional costs you will need to factor in:

• Bank charges on your bond (varies from bank to bank).
• Insurance: As a homeowner and bondholder, you will need to take out homeowner's insurance, household contents insurance and life assurance, all of which require monthly premiums to be paid.
  
• Moving costs: This depends on how far you are moving and the quantity of goods you need to move, but can run into several thousands of rands.
  
• Set-up costs: 'Simple' things like having your TV set up in the new house, or a telephone line installed all cost money and you might be surprised how the list goes on and on!

Because buying a house means covering all these additional costs, it makes even more sense to be financially prepared before you take the leap.

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