While Bontle thought she had done all her homework, having saved for a deposit and bond registration costs, she was surprised to discover that there are even more fees when it comes to buying a property.
Apart from bond registration costs there are also transfer costs which need to be paid to the conveyancing attorney to lodge the title deed and transfer duty if the property price is above R1 million. In Bontle’s case, the total bill for all these fees was R73 476.
“I knew about the bond registration costs from the mortgage quote, but I thought it covered all the fees. I wish the estate agent had told me about the real costs,” says Bontle whose unexpected transfer costs, including the attorney fees and transfer duty, came to R 47 985.50 which she had to put onto her credit card.
Attorney transfer costs: This is payable to the attorney for transferring ownership into your name, and is calculated according to the purchase price. The attorneys will also charge you for smaller, variable costs such as FICA fees, instruction fees and postage. These fees follow published guidelines, and the seller appoints the transferring attorney, even though the buyer pays the attorney.
Transfer duty: This is a tax paid to SARS on properties exceeding R1 million and is based on a sliding scale:
Bond Registration: You pay another set of attorneys to issue the mortgage over the property and register the bond with the Deeds Office. These attorneys are usually appointed by the bank. There is also a bank initiation fee on the issuing of a new home loan. You can negotiate the legal fees with the bank and Capitec offers a 40% discount on bond registration fees. Bontle paid a total of R 25 491.20 which included the R6037.50 initiation fee charged by Capitec Home Loans and is applicable to all property values. Capitec offers a 50% discount on bond registration fees for Switches and Refinances.
The table below provides approximate costs to give you an idea of what to expect. These amounts include VAT but may vary from attorney to attorney.
*as at 1 July 2020. Excludes any costs associated with clearance certificates for sectional title properties.
Waiting for transfer
From the time the application is approved it takes around three months for a property to be transferred into your name. Despite purchasing the property in November while under lockdown, Bontle’s transfer took place in just over three months. However, delays could happen such as:
- Delays from Municipalities in providing rates clearance certificates
- Deeds office delays due to closure over the festive season or short staff issues due to lockdown
- Delays in linked transactions where the transfer is linked to another property transaction (eg buyer’s sale falls through or seller’s new home transfer is delayed)
- Conditions in granting of loan (eg engineer’s certificate required due to structural concern)
- Divorce or estate late matters often delay transfer
In some cases, the buyer may want to move into the property before transfer and pay occupational rent. This would have to be agreed and form part of the offer to purchase agreement. Wiehahn Koch, head of business solutions at Capitec explains that if the buyer wishes to take occupation prior to transfer they would need to pay the agreed occupational rent to the seller for the period they occupy the property prior to transfer. It is important that the buyer does not make any capital expenditure/improvements to the property prior to transfer as they are not yet the registered owner.
If something should happen to prevent transfer, this could mean they could lose whatever they spent on the property. Should the buyer take early occupation they must ensure that the household content insurance of the seller is still in place as the risk only passes to the buyer on transfer.
Frequently Asked Questions
What are the pros and cons of taking out a joint mortgage?
A joint application can help increase your chances of qualifying as both parties’ incomes and expenses are taken into account to assess the affordability based on their disposable income. However, you need to understand the legal ramifications including the fact that you are liable for the full home loan repayments should your partner default.
Pros:
- There is a high likelihood that the housing loan application will be approved if both individuals have a good credit record.
- You can afford to buy property that one partner wouldn’t necessarily afford with their salary alone.
- You could benefit from a good interest rate as affordability assessment is done on both parties.
Cons:
- If you are not married, you will share ownership of the property with another individual once paid off.
- If there is a default, both partners’ credit records are affected. That means if your partner stops paying their portion, your credit record is affected.
- Should one partner want to pull out of the bond agreement, a new bond application will have to be processed and a full credit assessment conducted on the application to verify affordability.
- In addition, the home loan facility will be closed, which means you will have to pay bond registration fees for the new home loan facility.
- Upon the approval of the home loan, the bank may require both applicants to have adequate life cover that will be ceded onto the bond.
During the application process, both parties need to sign all the necessary documents such as the offer to purchase, home loan quote and legal documents, etc. Most importantly, the monthly debit order has to come from one account. As a result, this will have to be agreed beforehand to ensure that there are always funds available to avoid defaulting on the monthly bond repayments.
What are the pros and cons of buying a property with cash?
Buying with cash saves you money not only on the interest you would pay on the home loan but also the legal and banking fees associated with taking out a mortgage. However, if you are using up all your emergency funds and leaving yourself with no liquidity, then there could be an advantage to taking a small value home loan, especially if you are considering future home renovations. Home loans tend to have lower interest rates than personal loans, however, you need to balance this against the costs of registering a home loan.
If you are buying with cash, make sure you still use a reputable attorney to conduct the transfer. There have been horror stories of people buying houses from sellers who do not own the title deed. No monies should ever be paid directly to the seller, rather the funds need to be held by the attorneys in a trust account until transfer has taken place. This principle applies to deposits as well, they should never be paid to the seller or estate agent, only to the attorney handling the conveyancing.
By Maya Fisher-French
*This is part 4 of a 6-part series in partnership with City Press, which takes a first-time home buyer through the process from beginning to end.
