Hidden Purchasing Costs - 04-28-09

April 28 - Potential home owners looking to purchase a property need to bear in mind that the asking price of a house is not the last amount of money they will need to lay out in the process.

The Managing Director of Sanlam Home Solutions, Piet van der Walt warns home owners that they should budget for all the hidden costs that many buyers only seem to learn about AFTER they believe that they have finally saved enough money for their dream home.

One of the biggest expenses that face buyers is, naturally, the deposit on a property. Most banks demand deposit rates of around 20% before they will approve home financing. This sum can reach into the hundreds of thousands, depending on the value of the property, and many buyers don't realize just how much they are expected to put down before the purchase.

Transfer duties are also incredibly steep, and can reach around R20,000 on a home worth R1 million. This is not the type of cash that the average person has lying around and can sometimes be the deal breaker once buyers realize how much more extra cash they will need to fork out.

Taking out a home loan also doesn't come cheaply. From initiation fees (around R3,500) to attorney bond registration costs (R6,500), the amounts all add up to a significant number that many buyers did not have a clue about before they started the process.

Finally, monthly payments should also be budgeted for when considering buying a property. Over and beyond the monthly repayments on the bond, which can reach thousands of rand each month, buyers should take into account mandatory life insurance required by the bank before it will issue home financing, as well as municipal rates and taxes and utilities such as water and electricity.

The bottom line is that buyers are advised to do their homework very well before deciding whether they can afford to take out a home or bridging loan from South Africa's banks or not.