Looking to buy your first home? This is what you need to know...

Beware hidden costs of buying property

From transfer fees to municipal rates and levies, these extra costs can all add up and leave you living beyond your budget.
From transfer fees to municipal rates and levies, these extra costs can all add up and leave you living beyond your budget.
Image: File picture/Pexels.com

Buying property for the first time can be a daunting task, and if you make the wrong choice, it can leave you with a 20-year financial headache.

Many new home buyers have been caught out by the fact that the cost of their new home is only the beginning.

From transfer fees to municipal rates and levies, these extra costs can all add up and leave you living beyond your budget.

Making this commitment requires as much research as possible, Staytoday Properties principal Jurie Kotze said.

Rawson Property Group franchisee Erna Dyer said you must be happy and comfortable in your new home.

If you have decided to take the leap, this is what you need to know before your first property investment:

1. Get pre-approval

The first thing you need to do is to get yourself pre-approved.

That means going to the bank and asking: “How much are you willing to lend me?”

“Once they give you an amount, it gives you a rough idea of what you can go shopping for. This not only gives you more confidence, but it also gives you more negotiating power,” Kotze said.

“You also have the option of using a mortgage originator.”

The mortgage originator, Kotze said, goes to all the banks on your behalf.

Different banks have different criteria and different appetites for credit.

“The mortgage originator can advise you on your credit score. You might have a low credit score, simply because you don’t have any credit.

“They can then show you ways of improving your rating and as such, change your interest rate for the next 20 years.”

2. Prepare your budget

“It is important for buyers to draw up a budget and understand the full costs involved when they decide to enter the property market. You need to be in control of your finances at all times,” Dyer said.

Buyers might not always qualify for a 100% home loan.

“In most instances, financial institutions will require the buyer to pay a deposit upfront to the transferring attorneys.”

To reduce the impact of some of the major costs, saving enough for a deposit can be a great help for a buyer.

The deposit can not only lower the bond costs, but will also reduce interest rates and banking costs.

3. Understand the fees

“There are two attorneys involved in the process. First is the transferring attorney who takes property from the seller’s name to the buyer’s name,” Kotze said.

“Then there is the bond attorney, who registers the bond onto the property in the name of the financial institution.

“Both the transfer and mortgage bond costs vary depending on the price of your home purchase,” Kotze said.

A former Port Elizabeth resident who now resides in Broadacres, Johannesburg, Lauren Bhana, 27, said it was imperative to take note of the levies, as well as rates and taxes of your new property.

“It is important that you take note of these fees when looking at buying property – some levies are exorbitantly high and you need to add these costs to your monthly bond instalment when budgeting,” Bhana said.

Another first-time buyer, Siobhan Jenneker, 26, who bought a property in Glenhurd, Port Elizabeth, said she was fully aware of the imminent payments she would need to make to both the seller’s attorneys and transfer attorneys.

“Because I knew how much I qualified for, I worked out how much the transfer costs would be and prepared myself mentally and emotionally for the big chunk of money I was about to let go of.

“It is an old house which requires some work, so I am quite aware that I would also need to spend some money on it to get it in a presentable state,” Jenneker said.

4. Do your homework

Kotze said once you started looking for your house, there were useful tools on Property24 and Private Property where youcould see what homes were selling for in the area.

“Do lots of homework before buying the property.

“If you’re making a R1m decision, it’s not just something you can decide over a weekend,” Kotze said.

5. Don’t sign what you don’t understand

It is the agent’s duty to fully explain the offer to purchase to the buyer and essentially there should not be any hidden costs.

“The buyer must demand that the agent explain the contract as you need to fully understand every single detail,” Kotze said.

Dyer said buyers who purchased a freehold property would have other additional costs, including home owner insurance and often financial institutions also required life assurance cover.

“Being a home owner also entails the ongoing costs of maintenance of the property, garden, swimming pool and municipal charges,” Dyer said.

6. Managing your finances after your purchase

Bhana said including items, such as furniture, essential appliances, possible carpet cleaning and moving company costs into your initial budget, could help you stay within your budget when buying the property.

“Once you have bought the property, I suggest you spend monthly on decor and other household necessities, as opposed to trying to furnish your place and getting all the items you would like in one go.”