What to budget for when buying a new house?

 

You have finally managed to find your dream house and want to make an offer, but you are concerned about your budget and everyone keeps telling you that with a new house there are so many additional costs you need to take into account. So what should you realistically be budgeting for?

Broadly speaking there are "once off costs" and "regular monthly costs" that need to be considered.

Conveyancing fees are the first “once off cost” item on the list. The seller usually nominates the transferring attorney and the bank will appoint the bond attorney. Accordingly, there will be two separate accounts payable which will fall to the buyer to settle. Apart from the fees for registering the transfer and the bond, which are calculated according to a prescribed sliding, the following items are also included in the accounts of the conveyancers:

• Transfer Duty (a tax payable to the South African Revenue Service) in the event of a transfer where the purchase price exceeds R750,000.00
• VAT on the transaction if the seller is registered as a VAT vendor;
• Postage and petties
• Fee for obtaining a rates clearance certificate from the municipality;
• Fee for obtaining the transfer duty receipt via E-filing;
• Registrar of Deeds registration fee;
• Fee for FICA verification;
• Diverse disbursements which may include: deeds searches, lawdeed tracking fee, copy of the title deed, courier cost, etc.
• Fee for the services of the conveyancer

Looking at other "once off costs" you should take into account the facts and your special and personal circumstances and needs. These costs, depending on your circumstances, could include:

• Deposit on the new house;
• Occupational rental, if you are planning to take occupation before date of registration;
• Municipal deposits for electricity and water;
• Deposit for telephone and land / data lines;
• Cost of relocation/moving;
• Cost of new curtains/blinds, carpets;
• Costs of new appliances, such as a stove, dishwasher, washing machine etc.
• Cost for installation of satellite tv;
• Costs of new security system, particularly where required by your insurance
• Home Loan initiation fee payable to the bank;
• Home inspection fee, should you wish to utilize the services of a professional home inspector;
• Perhaps you are moving from a flat to a house with a garden – then you may need a lawnmower and other garden tools;
• House repairs/refurbishments to repair/upgrade critical areas of your new home that may need work or repairs;
• New furniture costs, particularly if moving from a smaller to a larger home.

“Regular monthly costs” should also be carefully considered as these can have a tremendous impact on your monthly cash flow. Some of the most important monthly expenses are:

• Bond instalments on your home loan;
• Homeowners insurance on your home, and not only the premium on the house itself. Remember to notify your household insurance company of your new physical address. This could impact on your monthly premium as the "risk factor" is calculated by the insurance company with reference to amongst other things, the area where you are residing, if the property has a fence, alarm system, burglar proofing etc;
• Municipal rates and taxes. Ask the seller or estate agent to provide you with copies of the statements for at least the last 12 months;
• Monthly water and electricity costs. Again ask the seller or estate agent for copies of previous statements;
• Monthly levy if you are buying in a sectional title unit;
• If the property has a swimming pool, include costs for pool maintenance;
• Is the house situated further away from your place of work, schools, shopping centres, other key destination areas? Remember to increase your fuel budget accordingly;
• Ongoing maintenance of the property. As a rule of thumb, you can spend between 0.5% - 1% of the value of the property on regular maintenance of your home;
• Life insurance premiums may increase should you have to increase your cover as security when taking into account the bond amount.

When you are ready to make an offer on a property, contact your attorney to discuss the offer you want to present to the seller. Your attorney can assist you with drafting your offer to purchase, provide you with an estimation of the conveyancing fees and explain the different cost items you may face. Also inquire from your attorney whether you may need to update your Will with the details of the new property that you will be acquiring. Then, armed with a well-prepared budget and your offer to purchase, it is time to make your dream a reality.