By: Hannah Myburgh
Purchasing a larger home involves more than just a higher asking price. From unforeseen costs related to property transfer and maintenance to ongoing expenses such as insurance and utilities, it's essential to understand the true financial commitment involved fully.
When placing your existing home on the market keep in mind that, as the seller, you are responsible for paying the estate agent’s commission. As such, it is important to negotiate these fees upfront as it will have a direct impact on the amount you net from the sale of your home. The standard estate agent commission rate in South Africa is between 5% and 7.5% of the sale price, although this can be negotiated.
To transfer ownership of your property, an Electrical Certificate of Compliance (ECOC) which confirms that all electrical installations, including plugs, lights, the DB board, geyser, and wiring meet legal standards is required. If your property has been maintained in compliance, a standard ECOC typically costs around R2 000.
Many banks require a valid ECOC for bond registration, and transfer cannot proceed without it. If your property’s electrical compliance is outdated, you may need to invest in necessary upgrades to meet the criteria. Additionally, budget for inspections such as water, beetle, gas, and electric fence compliance to ensure all certification requirements for the transfer process are met without delays.
When selling your property, factor in the potential cost of approved building plans. Buyers often request proof of approved plans and may include a suspensive condition in the offer to purchase. Additionally, some financial institutions require approved plans before granting a home loan.
If you lack approved plans, you may need to cover architectural costs to have them prepared. Another key consideration is settling your home loan, which includes a bond cancellation fee. Banks typically require 90 days written notice of your intention to cancel the bond, so notifying your bank as soon as you list your property is advisable.
When purchasing a new property, you may need to pay a deposit, depending on your credit rating and the terms of the home loan offered by your bank. Additionally, a once-off bond initiation fee is charged when securing a home loan, capped at R6,037 (including VAT), and can either be paid upfront or capitalised into your loan amount.
One of the most significant costs to budget for as a purchaser is transfer duty, which is calculated based on the value of the property, not the purchase price, and is payable over and above the selling price. In addition to transfer duty, there are transfer costs—professional fees for the transferring attorney who will handle the registration of the property at the Deeds Office.
Another expense to account for is the bond registration fee, paid to the bond attorney responsible for registering the bond alongside the transfer. To avoid unexpected expenses, always request a detailed breakdown of all costs from the attorneys to prepare effectively for the financial implications of the property purchase.
When planning your move to a new home, it’s crucial to plan the logistics and timeline while estimating the associated costs. Transportation and storage expenses can vary greatly based on the removal company you choose, the type of services provided, your new home's location, the nature and value of your possessions, and whether any special services like piano transport, artwork crating, or hoisting large furniture are required.
If renovations are planned, you may need to budget for professional services such as a draughtsman or architect for drawing up plans. Other potential costs include security upgrades like alarm systems, electric fencing, garden beams, and additional gate controls. Installation fees and deposits for services like landline, fibre, networking, and gas are often required. A larger home may necessitate purchasing additional furniture and appliances, as well as paying for furnishings such as blinds, curtains, carpets, light fixtures, bathroom fittings, and plumbing connections.
Upon moving into your new home, it’s essential to update your monthly budget to accommodate additional expenses. If your home purchase is financed through a home loan, use a bond calculator to determine your anticipated bond repayments.
Keep in mind that while interest rates are currently low, it’s wise to leave room in your budget in case of future rate increases. If you’ve bought a freestanding property, expect monthly charges for sewerage, road maintenance, street light upkeep, and refuse collection, which are based on your property’s market value. Municipal online calculators can help you estimate these costs. Additionally, a larger property may incur higher water and energy expenses.
From an insurance standpoint, many banks will require life cover equal to the value of your home loan. If you need to increase your life cover, remember to factor in the increased premium costs. Additionally, update your short-term insurance to ensure your new home’s building and contents are properly covered, including these adjusted premiums in your budget.
* Myburgh CFP® is a financial planner at Crue Invest (Pty) Ltd.
PERSONAL FINANCE