The costs of buying a home fall into two categories. Firstly there are the "one-off" costs related to the purchase and transfer of the property. These costs, as outlined below, have to be paid on top of the purchase price of the property. What many people do not know is that some of these are negotiable.  We have noted where this is the case. Obviously the buyer must ensure that he or she can afford these "hidden costs" prior to making the offer to purchase. 

Tip: Some institutions will allow you to include these costs in your mortgaged amount.  Remember that this means that you will be paying off these costs (plus interest) over the life of the mortgage.

The second category of costs are the ongoing costs or those that the home owner will incur on a monthly basis for the life of the mortgage (and sometimes beyond). You need to be sure that these have been factored into your budget.

One-off costs

Usually just the deposit is paid. The remainder has been borrowed from the bank.

Tip: For a small fee you can do a deed search at the deeds office, which will reveal the history of the property you intend to buy as well as the amounts for which it was sold in the past. This may well give you an idea of how much profit the seller is trying to make. Be careful as the search will not indicate improvements made to the property subsequent to the purchase.

As your bond is a legal document lodged with the deeds office, you will be liable for the costs associated with this. They are:

• Mortgage bond registration costs (negotiable) - these are the fees for attorneys for drafting the bond documents and lodging them at the deeds office.
• Valuation fee (negotiable) - the fee for the bank's valuer for determining the value of your home.

The fee payable to the attorney effecting the transfer of the property. While there is a scale of fees laid down by the Law Society it is only a recommendation and is subject to negotiation. It is, however, up to the buyer to inquire about this.

Transfer Duty scales
R0 - R190 000 = R0
R190 001 - R330 000 = 5% on the value over R190 000
R330 000 and over = R7000 plus 8% on amount over R330 000

A fee charged by the deeds office for the service of registering the bond and passing transfer.

The local authority concerned will want the rates for the year to be paid in full prior to giving a clearance certificate to the transferring attorneys. The rates cost will be split pro rata between buyer and seller depending on when the transfer takes place.

The connection fee for electricity is payable to the local authority if the dwelling does not have a pre-paid meter. There is a nominal charge for a new pre-paid card in the case of these meters. There is also a charge for transferring a telephone number or connecting with a new number. These charges are normally added to the next month's billing.

Moving and/or storage of household belongings prior to moving into the new property. 

Insurance of household goods while in storage and during the removal process.

Improvements to the purchased property. This could be repainting, new carpets, an alarm system, burglar bars or any other improvement required before moving in. It is important to have quantified these costs before deciding to purchase.

If all this hasn't put you off buying a property, then what about.

Monthly Costs

This is the instalment calculated according to the amount that you borrow, the period of your repayment and the interest rate at which the loan was granted. 

Tip: Obviously the longer the period, the smaller the repayment, but be careful - the reduction is not as much as you might think! The following example illustrates this:

Repayment on a bond of R300 000,00 over 20 years at an interest rate of 10.5% = R2995.14

Repayment on a bond of R300 000,00 over 25 years at an interest rate of 10.5%  = R2832.55

A quick calculation reveals that for a total saving of R162.59 per month you will pay an additional sum of R130 931.40 over the life of the bond!

While it is also common sense to insure your property, most financial institutions insist that insurance is taken out as a prerequisite for bond financing. This premium is often added to the bond amount on an annual basis and the premiums are built into the repayment amount. It is important to ensure that this adjustment has taken place, as otherwise, instead of decreasing, your bond may end up increasing.

Tip: Read the insurance document and be sure you are covered for the events that are likeliest to strike in your area, e.g. veld fires in certain areas of the Western Cape , landslip if your property is on a steep slope etc.

Again, some financial institutions insist that you have a life insurance policy covering the amount of the bond and that this is ceded to the bank. This aside, it is wise, as your liabilities have increased by the value of the bond, that you adjust the sum for which your life is assured. 

Tip: Greenlight offers a number of combinations of benefits that could cover you in the event of death, disability or both in a cost-effective package.

While this is by no means compulsory it is nonetheless a necessity in South Africa . The insurance company may require you to effect alterations to the property in order to qualify for insurance (see also one-off costs). Get a quote now for homeowner's insurance.

Tip: By amalgamating your homeowner's and household insurance policies under one insurer you will save money overall.

These are taxes on property owners levied in order to pay for municipal services. The amount of this tax differs from local authority to local authority (and sometimes within those authorities) as does the extent of services that it covers.

Tip: These rates and taxes are based on a valuation of your property. This is not "cast in stone" and if you believe that your property is overvalued you have the right to take this up with the local authority. If you do this, be sure that you have done your homework first!

You will have to pay a monthly charge for water and electricity usage.

A fact of life in this modern world and as mentioned above, very often a prerequisite for insurance cover.

As any experienced homeowner will tell you, there is no end to this part of owning a home. It is wise to set money aside in a "sinking fund" to cover items subject to wear and tear and consequently not covered by insurance. Examples of this are:

• Repainting the house - paint doesn't last forever and needs redoing periodically, typically as often as 3-5 years at the coast. 
• Geysers bursting - often covered by insurance if a defect in the cylinder, BUT NOT if occasioned by wear and tear.
• Swimming pools - a veritable money pit! Make allowances for chemical costs, pump maintenance and even leaks.
• Gardens - some people find gardening therapeutic, others a trial. If you're one of those, you need to set money aside for garden services.