Buying your first house is one of the biggest decisions you can make. Not only is it a big responsibility, it can also be financially draining, especially if you are not prepared for the necessary requirements involved.
ONE: Know how much you can afford
Once-off costs are usually paid upfront when you buy a home and include the deposit, bond registration fee, transfer fees, property assessment costs, a home loan initiative fee, and a deeds office registration fee. Some of these fees will be charged to your home loan account. A monthly administration fee will also be charged by your bank, which will be included in your monthly home loan repayment.
Another important consideration is the interest charged on your bond. There are two interest rate options to choose from:
- Fixed rate: For the fixed rate option, you pay a fixed instalment for an agreed period of time.
- Variable interest rate: A variable interest rate option changes as interest rates change.
Generally, you should aim to only spend roughly 28-30 percent of your gross income on paying your mortgage.
TWO: Prepare a deposit
Usually, whenever you sign an offer to purchase, you will be asked to put down a deposit. This will range from a few thousand rands to 20% of the property price depending on the seller and estate agent. There is no legally binding stipulation that you must pay a deposit, but it will increase your chances of getting a bond approved. A higher deposit also means lower monthly instalments.
A deposit is usually paid within a time period stipulated in the offer to purchase. This time period must be negotiated with the estate agent, but it’s usually two weeks from signature, and is paid into the conveyancing attorney’s trust account.
THREE: Budget for extra costs
The purchase price of a property is not all that you’re going to pay. There will also be several other fees that can increase costs. These include bond registration and transfer costs, moving costs, general repairs and maintenance on the house, rates and levies of the property, and insurance, which your bank will insist on.
FOUR: Know what you want
When looking for a property to buy, you should try view as many properties as possible and compare them to be able to make the best decision. However, before you even start looking, you should know, more or less, what it is you’re looking for and what you might be willing to compromise on.
FIVE: Making an offer
Once you’ve decided on the property you would like to buy and taken care of all the finances, you will need to complete an offer to purchase or an agreement of sale. This is a written agreement stating the terms and conditions under which you agree to buy the property. It’s best done with the assistance of an agent or attorney who can set out all the conditions and explain the process to you. The signed offer to purchase will be submitted to the seller – the South African law does not recognise verbal agreements in respect of sale and purchase of immovable property.
It is always best to consult with an expert when it comes to property. There are many steps involved which can be daunting and confusing for someone who has never gone through the process before.