The extra costs involved when taking out a home loan

There are many fees involved in taking out a home loan and a person or family wanting to purchase a home should know what these fees are beforehand in order to prepare their finances.

Most home loans require a deposit and the bigger the deposit, the lower the monthly payments will be.

One of the ‘hidden fees’ is Occupational Rent. This could be charged when the home buyer moves into the home before the bond is completed or registered. This money is paid to the seller of the house. To avoid this fee, try to stay in your existing house until the bond is registered.

The receiver of revenue is where a tax is paid by the buyer of a new house for its purchase and placing the house in their name. If you purchase a piece of land, then the tax (or duty) would only be on the transfer of the land; for an existing house, the tax needs to be paid on the value of the land and the house.

The first R190, 000 of the purchase price is duty-free, there are to be no taxes paid on this amount. When an amount for a house or land reaches R190 001 to R330 000 then the duty is 5 percent of the purchase price. Another 8 percent is added when the value reaches over the R330 000 amounts.

There is always a conveyance fee or lawyer fee, which varies depending on the loan amount and where a homeowner is obtaining the loan from.

The deeds office charges a fee to transfer and register a property and this fee fluctuates a lot depending on the original purchase price of property. There is also a variable registration fee depending on the size of the bond.

The local authority rates must be paid in full for the financial year prior to the property being transferred. For the part of the year that the seller was in the house, they owe for that time, the buyer will receive a clearance certificate charge that is typically around R300.

A property inspector will come to the property and make sure the value is in relation to the loan or if more loan funds will be needed. This person’s fee is typically R1000 to R3000.

Until the first installment is made and when the bond is registered, the bank will release the loan amount and charges will be added to the loan as interest at this time.

The bank has to make money off the home purchase and they typically do that from funds in the bond initiation fee. This is a once off fee for administrative costs and ranges from R200 to R1250.

A bank holding a loan for a house will insist that a homeowner purchase house insurance before they will register the home. Insurance of any kind is a ‘necessary evil’ because a person pays it homing they will never have to use it but if and when the time comes to use it, they hope it is there.