The Hidden Costs of Buying a Home: What Buyers Need to Budget For
The Property Perspective is a weekly radio show on 919 FM, airing every Tuesday at 4:15 PM with Al and Lesedi on The Drive Train.
Episode 20 | The Property Perspective with Etchells & Young
You've saved your deposit, worked out the monthly bond repayment and found the home you want to buy. But is that really everything you need to budget for?
In Episode 20 of The Property Perspective on 919 FM, Harry looks at the additional costs that can catch buyers by surprise, both during the purchase process and once they become homeowners.
In This Episode
Harry explains why buyers need to understand the total cost of buying and owning a property rather than focusing only on the purchase price and monthly bond repayment.
Harry discusses:
Why the deposit is only the beginning
Transfer and bond registration costs
Transfer duty versus VAT when buying property
Moving costs that buyers often overlook
Insurance costs associated with owning a home
Municipal deposits, rates, taxes and levies
Immediate repairs, alterations and maintenance
Why buyers should calculate the total cost before making an offer
Watch Episode 20
The Property Perspective airs weekly on 919 FM.
Your Deposit Is Only the Beginning
Many buyers focus on saving enough for a deposit and calculating whether they can afford the monthly bond repayment.
Harry explains that this is only part of the financial picture.
There are several costs involved in getting the property transferred into your name, setting up the new home and then maintaining it once you become the owner.
Understanding those costs before signing an offer can prevent a major financial squeeze later.
Buying a Home Does Not Mean Moving In Immediately
Property does not change ownership the day the offer is signed.
There is a transfer and conveyancing process that needs to take place before the property is registered in the buyer's name.
Harry explains that buyers should therefore avoid cancelling their existing accommodation too early.
In some transactions, an earlier occupation arrangement may be agreed, but that is separate from the actual transfer of ownership.
Transfer Duty or VAT?
The way tax is dealt with can differ depending on who is selling the property.
Harry discusses the difference between buying from a private seller and buying from a developer or other VAT vendor.
These costs do not work in exactly the same way, which is why buyers should ask their agent or conveyancer what applies to the specific transaction before working out the final budget.
Transfer and Bond Registration Costs Can Be Significant
One of the largest upfront expenses can be the legal and registration costs associated with the purchase.
Harry highlights both the property transfer process and, where finance is involved, the registration of the buyer's bond.
These amounts sit outside the simple monthly bond repayment calculation and can become significant as the value of the property increases.
Ask for a proper cost estimate before committing to the purchase.
1. Don't Forget the Cost of Moving
Moving within the same neighbourhood may be relatively inexpensive.
Moving a household across Johannesburg or between provinces can be a very different story.
Removal companies, packing, transport and other relocation expenses should form part of the buying budget rather than being dealt with as an afterthought once transfer is almost complete.
2. Budget for Insurance
Home ownership introduces several insurance considerations.
Harry discusses cover connected to the home itself, personal belongings and the financing of the property.
Buyers using a bond may also encounter insurance requirements from their lender as part of the finance arrangement.
These are ongoing monthly expenses that need to be included when comparing the cost of owning with the cost of renting.
3. Municipal Costs and Deposits
New owners may need to budget for setting up municipal accounts and the deposits associated with services.
There are also the ongoing costs of rates and taxes, water, electricity and other municipal charges.
A larger property may come with considerably higher running costs than the home or apartment you currently occupy.
These expenses should be understood before deciding how much property you can comfortably afford.
Buying in a Complex or Estate? Check the Levies
Sectional title developments and estates usually introduce an additional monthly expense in the form of levies.
These can contribute towards security, maintenance of shared areas and other communal services.
Harry also reminds buyers to understand whether there are other potential costs, such as special levies, that could affect the monthly ownership budget.
Two properties with the same purchase price can therefore have very different monthly running costs.
4. Allow for Immediate Repairs and Changes
Once you own the property, it is natural to want to make it your own.
Painting, replacing fittings, renovating rooms or making other alterations can quickly add to the amount spent immediately after transfer.
There may also be genuine maintenance items that need attention soon after moving in.
Harry recommends allowing room in the budget for these costs rather than spending every available rand on the deposit and transfer process.
The Costs Continue After Transfer
Once the property is registered, the financial responsibilities do not end with the bond repayment.
Rates and taxes, levies, insurance, security, garden maintenance and unexpected repairs all become part of the ongoing cost of home ownership.
This is why the common comparison of "rent versus bond repayment" does not always tell the full story.
A realistic affordability calculation needs to include the cost of actually owning and maintaining the property.
Are Any of the Costs Negotiable?
Some are and some are not.
The purchase price itself is naturally subject to negotiation between buyer and seller.
Harry also discusses circumstances where certain professional or finance related charges may potentially be reduced.
Taxes and statutory charges are different and are not simply negotiated between the buyer and seller.
The lesson is to ask for a complete breakdown so you know which amounts are fixed and where there may be some flexibility.
Don't Just Negotiate the Price - Understand the Total Cost
A property that fits within your bond affordability does not automatically mean it fits comfortably within your overall budget.
Before making an offer, look at the deposit, transfer costs, finance costs, moving expenses and the monthly running costs that will begin once the home is yours.
Knowing the total cost gives you a much clearer idea of what you can realistically afford.
Three Things Buyers Should Do
First, budget beyond the purchase price.
Second, understand each of the costs before you sign. If you are unsure, ask your property practitioner, bond consultant or conveyancer for a clear breakdown.
Third, leave room in the budget for home ownership itself. Maintenance, rates, levies, insurance and unexpected expenses do not stop once the transfer is complete.
A Key Takeaway
Buying a home should be exciting, but it should also be an informed financial decision.
Don't base your affordability only on the deposit and the monthly bond repayment.
Understand the upfront costs, understand the ongoing costs and ask questions before committing to the purchase.
The better prepared you are, the fewer financial surprises you are likely to face after moving in.
What Is The Property Perspective?
The Property Perspective is Etchells & Young's weekly property segment on 919 FM.
Each episode explores a different aspect of property - from rentals and property management to buying, selling, legislation, sectional title living and the everyday questions property owners and tenants face.
Follow the series as we unpack more of the issues that matter to Johannesburg property owners, buyers, sellers, landlords and tenants.
Planning to Buy a Property?
Understanding what you can afford involves more than calculating a monthly bond repayment.
Speak to the Etchells & Young team for professional guidance when searching for and purchasing property across Johannesburg's northern suburbs.
