The First-time Homebuyer’s Guide to Budgeting

Are you surprised to learn that according to Property24, the average age of first-time homebuyers in South Africa is 34 years old? If you’re one of them, you know just how difficult it can be to raise enough money to buy a home.

Lending institutions like banks don’t always give 100% loans, which means buyers must save for a down payment. Currently, the average deposit is 11% of the purchase price. Add transfer and bond registration fees, furnishings for your new home, insurance, rates, taxes, and levies, and you might be wondering if you’ll ever save enough!

Because preparation is your best weapon, hippo.co.za created this quick guide on the major costs you’ll incur when you buy your first home (and how to avoid some of them).

Home Loans

Once you’ve found your dream home, it’s time to apply for a loan. There are two main ways you can go about this:

1. Apply to banks yourself. The advantage is that if you have a good history with a bank or a personal banker, you may be able to negotiate a good interest rate. The downside is that it can get tedious submitting dozens of documents to multiple banks.
2. Use a bond originator. These companies apply to banks on your behalf at no expense to you. This is the more convenient, time-saving option because you only need to send your documents once to them. They may also have contacts at the banks that could result in a better deal for you. The downside is that you are leaving everything in their hands and may miss a contractual deadline if your originator does not work quickly enough.

Transfer and Registration Costs

Transfer and registration fees can be an unbudgeted shock to first-time home buyers. Typically, you’ll pay transfer duty to SARS, (if you bought the property for more than R900,000*) fees to the transferring attorneys, fees to the bond registration attorneys, and registration fees.

You can bypass a few of these costs if you buy from an off-plan development. You won’t pay transfer duty, and additional administrative fees are often already built into the purchase price.

Rates, Taxes, and Levies

Once you’re a homeowner, you will be responsible for paying municipal tariffs on water, electricity, sewerage disposal, and garbage collection. If you buy in a complex, you may also pay levies on top of that, which covers services like garden and swimming pool maintenance, security, and everything else that falls under the common areas of the estate.

Insurance

Why is buildings and home contents insurance among the costs you should budget for? No matter how old or new your home is, things might go wrong at some point; the geyser might burst, the roof may leak, the thatch could catch fire, or maybe you’ll be burgled. Having insurance safeguards you financially even if a catastrophe hits your beloved home.

Home Improvement

If you’re buying an older property, chances are you will need to do some kind of maintenance or renovations to it. Taking out a personal loan could potentially assist you in making your property the home of your dreams.

Now that you know what you’re dealing with financially, you can start saving to buy a home of your own, and one day, you’ll be paying money into your own investment instead of someone else’s.

*Prior to 28 February 2019

Sources: Property24; Business Live;

Prices quoted are correct at the time of publishing this article. The information in this article is provided for informational purposes only and should not be construed as financial, legal, or medical advice.