Buying a home ranks as the most expensive investment people make, but acquiring that dream comes with a price tag significantly higher than the listed price – and that can affect the deposit you have so carefully squirreled away to make that vital down-payment.

Richard Gray says the transfer duty – the government tax paid to the South African Receiver of Revenue on the transfer of property – is the largest additional cost.

“Transfer duty on vacant land is calculated exclusively on the land value, but when buying an existing house, a sliding scale applies to the combined land and building value,” he says.

To minimise the costs on entry-level properties, transfer duties are exempt on properties worth up to R500 000. However, for properties priced between R500 001 and R1 million the government claims 5% of the price, after which the duty shifts to R25 000 plus 8% of the price above R1m.

Gray says transfer duty should not to be confused with transfer fees, which are essentially the attorney’s costs for transferring the property and these are levied according to recommended guidelines.

Buyers also pay about R5 000 in bank initiation fees to cover the costs of reviewing the property before the bond can be granted. Gray says if the bank needs to repossess the property for defaulted payments, the institution wants to know beforehand that the asset is worth the amount loaned.

There are also costs involved in registering the bond, again calculated on a sliding scale depending on the mortgage size. Also, the municipalities also want to ensure their share, which means buyers are levied up to five months in advance on their annual rates and taxes.

Gray says sellers must provide entomology and electrical certificates of compliance which cost about R300. However, there may be other costs involved if the home needs to be tented against bugs and white ants (R4 000) or electrical maintenance.

Meumann White Attorneys’ managing partner, Bruce Forrest, says increasingly buyers must request copies of the municipal plans for the properties they intend buying.

“Too often renovations have been undertaken without planning approval – and that means you stand the risk of buying a property only to discover you have to knock down a section because it traverses the boundary wall,” he says.

Gray says once transfer has been effected, owners must take out homeowners’ insurance and consider taking out life cover. Homeowners’ insurance covers the cost of replacing the building if it is destroyed.

“Think of turning the house on its roof – what does not move is covered by homeowners’ insurance. Life cover, often a bond condition, pays out on the death of the breadwinners or owners,” Gray says.

By choosing Mortgage Plus for a loan, you will get that continual service to make sure you are getting the best deal possible.

CONTACT US

Speak to a home loan consultant about financing your new property or reviewing your existing mortgage. We are able to assist in lowering your bond repayments and securing attorney discounts.

Complete this short form online
Call us on 011.327.4489
Email: morne@mortgagepluscc.co.za

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There’s never been a better time to buy property!

This may take you by surprise – especially given how often you’ll hear differently in a week – but I couldn’t be more determined. Here’s why…

*** Firstly, property prices are incredibly low right now. According to Absa’s House Price Index, in real terms, “prices have dropped to levels last seen in early 2006”.

*** Secondly, thanks to the recent spout of interest rate cuts, prime is now only at 10%. That’s the lowest it’s been since October 2007. On a R1 million bond, you’re saving a whopping R3,216.92 each month compared to eight months ago when prime was at 15.5%.

Despite this, it’s become harder and more expensive to get a bank to approve your bond application. Back when the property market was booming, banks would happily give you a 100% home loan, regardless of the property value.

These days, you can count yourself lucky if the bank only asks for a 10% deposit. Most of them now demand anything between 10% and 30%. Even worse, they’re only willing to give you a maximum loan of 90% of the value of the house. This makes things tough for the prospective buyer and it’s why I’m going to share my top five tips to getting the best home loan out there.

Tip #1: Start planning 6 months in advance
If you’re thinking about buying a new house, do the work upfront. Approach your Mortgage Plus. Find out how much they’re willing to lend you and ask them to pre-approve your bond.

According to home loan financier, Mortgage Plus, “getting yourself pre-qualified before putting in an Offer to Purchase should be the first step you take. The National Credit Act stipulates that monthly deductions, e.g. income tax, monthly living expenses and debt need to be taken into account.” Just remember, pre-approval is only valid for 90 days. So be ready to act quickly.

Tip #2: Keep an eye on your credit score
I can’t stress enough how important your credit rating is. It shows that you take your debt seriously. And it affects the bond rates your bank is likely to give you. According to experts, the best rates tend to go to those with a credit score of 720 or higher; who have been with the same employer for at least two years; and have money for a deposit. So if you’re thinking of buying a house, request a free credit rating report at Itc. If your credit rating is less than ideal, work on raising it before you apply for a loan.

Tip#3: Shop around
According to www.propertymax.co.za , a “30 year loan is your best choice if you’re looking for a long-term stable loan. It’s usually the safest home loan you can get.” By stretching the repayment term to a 30 year bond you can bring down your monthly bond repayments. A longer home loan repayment term will improve affordability and free up your monthly cash flow. But it’s important to know that the longer the repayment term, the more interest you’ll pay. Remember this when you’re shopping around.

You’re likely to get a better rate if you bank with the loan provider. For example, a Standard Bank customer will get a 95% loan on a house worth R1 million. But a non-Standard Bank customer may only get a 75% loan. This isn’t guaranteed though… so shop around to make sure your bank’s giving you the very best rate.

Tip #4: Limit your credit applications
Your level of debt can affect the amount you qualify for. So think twice about applying for any other lines of credit if you’re applying for a home loan. The bank will just get the wrong impression of you. They’ll think you’re the type of person who shops ‘till they drop. It might compel lenders to turn you down.

Tip #5: Give a good down payment
The higher your deposit, the less you’ll need to borrow from the bank. And ultimately, the more you’ll save on interest. So if you want to keep your debt to the bare minimum, add extra cash to your down payment. If that’s not an option, try to pay a little extra (even if it’s just a few hundred rand) into your bond every month. You’ll soon see the benefits.

Getting the best loan, all comes down to that age old Scout mantra: “Be prepared!”

Here’s to your financial freedom,

CONTACT US
For more assistance with regards to Applying for Home Loan Finance .
Email: morne@mortgagepluscc.co.za
Ph: 011.327.4489
or Complete This Online Form