The costs of home ownership

The idea of owning your own home is probably an attractive one. With your name on the title deed, you wouldn’t be paying off someone else’s home loan, or need to deal with a landlord, or worry about the yearly increase. While it is an incredible (and oftentimes, romantic) idea, it’s important to know just how much owning a house can actually cost—it’s surprising how quickly the hidden and unexpected costs can add up. Let’s take a look at the costs involved in buying and owning a house:

If only the total cost of your house was what was advertised. In fact, depending on how you finance your house, it can be considerably more than you imagined. That’s why it’s a good idea to ensure that you have a decent deposit for your house before you take the plunge. This can drastically reduce your monthly repayments and the total cost of your house in the long term. If you would like to go this route (which is definitely recommended) then you should aim to save at least 8% of the property value for the deposit. The more you can save, the better - banks can ask for anything from 10% to 30% deposit depending on your credit score.

If you take out a bond, you will be charged a fee — called the initiation fee — by the bank. This can be paid upfront, or you can choose to have it added to your loan amount. Obviously, it’s better to pay this at the time of purchase to avoid having to pay additional interest later.

Here’s another big once-off payment you will need to make upfront. This duty is technically a government imposed tax, and without it, a property cannot be transferred to a new owner. If you purchase your property from a registered VAT vendor, such as a developer, you’ll only need to pay VAT and not the transfer duty. The VAT is included in the actual sale price and is not an over-and-above fee. The transfer duty is directly proportionate to the value of the property; the greater the value of your property, the higher the duty that needs to be paid. There are a few exemptions to transfer duty, such as certain properties (valued under R900 000) which are exempt from it. To calculate the transfer duty for a property within you budget range, see this great article by Private Property.

While transfer duties are imposed by the government, transfer costs are technically the legal fees required for an attorney to register your ownership of the property with the Deeds Office. This once-off fee ensures that your legal title to the property is protected. Many people don’t expect this expense and are then surprised when they have to fork out another R5000 to R10 000. If you would like to get an estimate of what these fees would be for your dream home, you can make use of an online home loan calculator.

When a bank grants someone a home loan, it registers a mortgage bond that ensures that it’s protected should anything go wrong. This bond needs to be registered, which usually happens at the same time as the transfer of the property. This is executed by a bank’s bond registration attorney, who will charge a once-off fee for registering the bond. As the buyer, you have to pay this fee before the registration process begins. A R1 000 000 bond for a freehold property might cost around R27,000. Private Property’s calculator (see link two paragraphs up) can help you with a more accurate figure.

When you have finally bought your house, finalised the transfer, and paid all the abovementioned fees, you might think that you’re done with all expenses associated with your new purchase. You’d be wrong. Unfortunately, the expenses we have already mentioned are only the tip of the iceberg. Here’s what else you need to consider:

If you have taken out a loan on your house, the bank is going to want to ensure that it’s covered should anything happen to you or the property. That’s why it will require you to take out both homeowners and life insurance. You will need to have these policies active for as long as you are paying back the loan.

Homeowners insurance protects the property from damage caused by things like floods or fires. Life insurance is cover that ensures that the cost of the remaining bond will be paid if the owner or bond owner dies. There are a number of different insurance companies that provide comprehensive plans, so shop around and find the best option for your circumstances and needs. If you don’t take these plans out through the bank (they offer their own set of plans when you take a loan), you will need to send them the proof of insurance purchased elsewhere.

Should you buy a sectional title property (for example, an apartment or townhouse), the complex itself needs to have building insurance which is paid for through your levy.

Things get really exciting once all the legalities, payments and paperwork have been finalised and you can take ownership of and move into the house. However, if you already have a lot of furniture that you want to move with, you’ll probably need to hire a moving company to help you. This can get quite expensive, so shop around for the best option and remember that month-end and weekends are the most expensive times to use these companies. If you can, move during off-peak times and enjoy the off-peak rates. Or consider hiring your own truck or bakkie and do the moving yourself.

When buying a freehold property, you will also have to factor in the installation of utilities. Water, electricity, telephone and internet lines will all need to be sorted when you move in. These costs may vary depending on the area you are in and whether or not any of the infrastructure already exists, but it would be a good idea to put aside around R3000 for these costs.

Once the transfer of the property is complete, you will need to register for rates and taxes on top of your electricity and water services. Keep in mind that for this, you will need to pay the municipality a deposit which is dictated by the municipal value of your new home. The rates fees usually cover garbage disposal and sewerage usage, and the taxes are calculated according to the value of the property.

Once the transfer of the property is complete, you’ll need to register for rates on top of your electricity and water services. Keep in mind that for this, you’ll need to pay the municipality a fee which is determined by the municipal value of your new home (this contributes to the upkeep of the area, emergency services and so on). Refuse and sewerage do not form part of the rates; they are billed for separately (these could be seen as “taxes”) but should be on the same bill.

If you buy a sectional title property, you will need to pay levies. These do not include the general rates but often cover sewage, refuse and water. There is the possibility that in the future, levies might not cover water in some areas (such as the Western Cape) as the drought has caused many complexes to opt for water meters.

Things like pools, electric gates, and geysers all need to be kept in working order if you want your property to be properly habitable. While you may get lucky with a property that is in great condition, you will probably still need to do a few repairs and possibly some changes when you first move in. The good news is that they will range in priority; some are non-negotiable while others will be a matter of taste. It would be a good idea to make a list of things you would like to improve so that you can figure out how much your desired improvements will cost.

Unlike homeowners and life insurance, the bank won’t make you take out contents insurance, but it’s definitely recommended to do so. This insurance covers the actual contents of your house in the event of theft or damage (in a fire or a flood, for example). Often, if you take out multiple plans (car insurance, homeowners insurance etc.) with the same insurer you will be given a more favourable premium.

We have covered the biggest and most common expenses when buying a house, but there are a couple that you may also be in for. These are not limited to but can include the following:

If you plan to take occupation of the property before the transfer has been registered, the previous owners will charge you occupational rent (usually stipulated in your Offer to Purchase). This rate is fairly calculated based on the value of the house.

One of the first things to consider when you move into your new home is whether or not you feel it’s secure enough. Take a look at what security measures other houses in the area have in place, do your research on the crime rates in the neighbourhood, and make any changes to your house’s security that you deem necessary. Armed response, alarms, beams and electric fences are some of the things you might want to look at and budget for.

When you move into a new house, you may feel compelled to buy new furniture and appliances. Write a list of things you need in order of priority from the absolutely crucial to luxury items, and start budgeting accordingly. Things (such as beds) that are vital should be high up on the list, followed by items that will make the space more comfortable.