What costs you’re in for…
Buying a home is a major milestone, but it’s also one of the biggest financial decisions you’ll ever make. While the purchase price might be R1 million, the real cost of buying a property goes far beyond that number. Many first-time buyers are caught off guard by the additional fees, taxes and long-term financial commitments involved in the process. This article breaks down the true costs of buying a R1 million home in South Africa, so you can budget with confidence and avoid nasty surprises.
For a breakdown of what each of these costs, this post contains everything you need to know.
Upfront costs to register a bond
Let’s start with those costs that you need to pay once your offer to purchase has been accepted. These are all once-off costs, paid out in the three months it’ll take to wrap up the home finance and transfer of a property into your name. Play around with various scenarios with our Bond Repayment Calculator.
Bond Registration Costs
When you take out a home loan, your bank will register a bond over the property. This involves attorney fees, which are paid by you, not the bank. You can ask your attorney when applying for a home loan to discount the registration attorney fees.
For a R1 million bond, expect to pay:
- Bond registration attorney fee: ±R20,000 – R30,000
- Postage, petties & VAT: ±R2,000 – R3,000
- Deeds Office fee: ±R1,100
Estimated Total: ±R25,000 – R35,000
Bond Initiation and Admin Fees
The bond initiation fee is an administrative cost charged by the bank to complete the paperwork required to initiate your home loan. This is a once-off fee of R6,037. It can sometimes be added to your bond, but you’ll pay interest on it over the life of the bond.
Costs to transfer a property into your name
Transfer Duty
The transfer duty is a tax paid to SARS on every existing property that transfers from one homeowner to another. It is only payable though when buying a property over R1.21 million. The good news: a R1 million property falls below this threshold, so you’ll pay zero transfer duty.
- Transfer Duty on R1 million: R0
Transfer (Conveyancing) Costs
Even though there’s no transfer duty, you’ll still need to pay the transferring attorney who handles the legal work to transfer ownership to your name.
- Transfer Attoney fee: ±R20,000 – R30,000
- Postage & petties + VAT: ±R2,000 – R3,000
- Deeds Office fee: ±R1,100
Estimated Total: ±R25,000 – R35,000
Summary: Estimated upfront registration and transfer costs for a R1 million property
| Costs | Property / Bond value = R1 000 000 |
|---|---|
| Bond registration cost breakdown | R37 555 |
| Bond registration costs | R28 244 |
| Bank initiation fee | R6 037 |
| Deeds Office levy, Postage and Petties | R3 274 |
| Property transfer cost breakdown | R37 555 |
| Property transfer costs | R28 244 |
| Transfer duty | R0 |
| Deeds Office levy, Postage and Petties | R4 114 |
| Total Bond and Transfer Costs | R69 913 |
Deposits: to have or not to have
Although it’s possible to get a 100% home loan (especially for first-time buyers), many banks prefer buyers to pay a deposit once your home loan has been granted. This is typically between 10% and 20%. A higher deposit improves your chances of approval and reduces your monthly repayments and interest over time and further reducing the amount your home costs you in monthly instalments over the long (20 year) life of your bond. A typical deposit on a R1 million property would be R100,000 (10% of R1 million).
The table below shows the impact that 10% and 20% deposits have on your monthly instalment, as well as the total amount repayable over the loan term. Based on an interest rate of 7.5% and a loan term of 20 years/240 months:
| Deposit | 0% | 10% | 20% |
|---|---|---|---|
| Monthly Bond Repayment | R8 055 | R7 250 | R6 444 |
| Total amount repayable over 20 year loan term | R1 933 424 | R1 740 081 | R1 546 739 |
| Savings amount over the lifetime of the loan | R0 | R93 343 | R186 685 |
In short, while owning a home is exciting and empowering, it’s crucial to plan for all the costs – not just the bond. Before you even start your house-hunting journey, speak to a Get Go Home Loans Specialist about calculating not only your affordability, but also the costs you’ll be incurring within the first few months of signing an offer to purchase. A Get Go Home Loans Specialist will be able to assist with your personalised pre-approval, which is an essential step on your homeownership journey. A pre-approval from GetGo Home Loans takes your current financial situation into account to calculate how much additional debt you can realistically take on to finance a new home. Buying wisely today means enjoying your new home with fewer financial regrets tomorrow.
