Costs Associated With Buying Property in South Africa
Key Takeaways:
Buying property in South Africa involves various costs beyond the purchase price.
Expenses include transfer duties, legal and conveyancing fees, and registration costs.
Understanding these costs ensures comprehensive budgeting and financial preparedness in property transactions.
When planning to buy property in South Africa, you need to be aware of the costs involved ahead of your property search. Here we outline the main costs, which vary depending on a number of factors.
The deposit required by a property buyer
The terms of your mortgage bond largely depend on the bank and your credit rating, but generally you will be expected to pay a deposit of between 10% and 30% upfront to secure your home loan. The deposit is usually paid to the conveyancing attorneys or estate agent.
The Initiation fee
The initiation fee is charged by the bank when your mortgage bond (home loan) is initiated. It’s best to discuss this with the bank concerned.
Bond registration and transfer costs
Bond registration costs
Your bond is registered by the the bond registration attorney at the same time as the property is transferred into your name. This is a once-off fee, and the amount is dependent on the price of the property.
Transfer Costs
Transfer duty tax is a government tax levied when transferring a property from the seller to the buyer and applies to properties being sold for more than R900 000.00 (below this amount is exempt from transfer duty). You can work out the fees on properties you’re considering by using our Transfer Cost Calculator.
Transfer attorney costs are the legal fees of the conveyancers who transfer the ownership of the property into your name. These fees should include the Deeds Office registration, postage and disbursements, as outlined in our guide to the Conveyancing Process. These fees are based on on the selling price of the property and a tariff set by the Legal Practice Council is used by conveyancers as a guideline.
Occupational rent
If you move into the property before it has been transferred to your name, the seller is likely to charge occupational rent accordance with the offer to purchase.
Homeowners and life insurance
To secure your home loan, the bank will require that you take out homeowners’ insurance which covers damage to your property caused by natural occurrences such as storms or fire. You will also be required to have life insurance, which will settle your outstanding bond amount in the event of your death. It is your prerogative to select which insurance provider to use, and it’s important to ensure you get the best value and cover for the cost, so research your options well before you decide.
Rates and taxes
Once the transfer is completed, you will need to register for rates and taxes as well as your water and electricity utilities. The municipality will require a deposit which is determined by the municipal valuation of the property. Also be cognisant of fees, or levies charged by residential estates, as you are likely to be liable for these fees on transfer - important to bear in mind if you have purchased a plot of land that you’ll be building on, i.e. you do not only start paying the fees once your build is complete.
If you need more information on any of these points our conveyancing attorneys will be happy to help.