Most of us aspire to owning our own home, but don’t know where to start. Buying a new home can be an exciting adventure or a daunting task. Deidre Munusamy, Provincial Sales Manager of Home Loans in the Western Cape, provides several hints and tips to make sure you know what to expect when purchasing a property for the first time.
The first step, is to first determine how much you qualify for and, given the tough economic climate, it has become more difficult to get banking institutions to cover the full purchase price of a property, let alone the costs associated with buying a home. As a first-time home buyer, you may qualify for a full loan including registration and transfer fees, or you might be required to tap into your savings to cover a portion of the purchase price which will be your deposit, as well as the transfer and registration fees.
There are of course advantages of having enough savings in hand to cover the fees, as well as making a small deposit towards the property. By paying the deposit, you are reducing the risk that the bank will carry in financing the purchase of your home. This reduced risk could translate in more favourable interest rates compared to relying on the bank for the full purchase price. It also reduces the monthly repayment of the loan as well as the total interest paid over the long term.
One of the most critical factors in determining if you qualify for a Home Loan is a favourable credit history. A favourable credit history shows that you conduct your existing credit accounts in an exemplary manner. It is important that you protect your credit history, as banks rely on the credit history in determining a risk score for your application. Therefore, the better your score, the more likely your application is of succeeding.
The main driver of costs related to the acquisition of property is the purchase price. All costs are determined by the price you pay for your home. There are several costs you need to be aware of before purchasing a home. These include:
Transfer Duty; a tax on the purchase of properties. This is payable on all properties where the purchase price exceeds R900,000.
Transfer Attorney Fees are payable to the attorney who is appointed by the seller to transfer the property to the name of the new owner.
Bond Registration Fees are payable to the attorney appointed by the bank to register the bond at deeds office to secure the loan.
The following diagram illustrates the costs for different purchase prices:
|Purchase Price / Bond Amount:||R900,000||R1,500,000||R3,000,000|
|Transfer Attorney Fees*||R20,850||R26,550||R38,750|
|Bond Registration Fees*||R20,850||R26,550||R38,950|
While the bank relies on your income and expenses as one of the measures to determine your affordability for the loan, it is also important that you protect yourself from a situation where you can no longer afford to pay for your dream home. It is therefore always advisable to leave some breathing room in your budget for unanticipated expenses.
While there are a lot of technical and legal aspects involved in the process of purchasing and financing a property, the overall experience should be an enjoyable one. House hunting for the perfect place, albeit a lock-up-and-go in the city or a cosy family home to raise your children in is a milestone in most people’s lives. Enjoy the experience and ask for advice from experts on all the complexities.
Allow South Africa’s number one Home Loan provider; Standard Bank, to help you invest in your next milestone.
Visit your nearest branch, to speak to your local Standard Bank Home Loans consultant for further information.