01 Sep BUYING YOUR FIRST HOUSE – AN ACTION PLAN
“Buy land – they’ve stopped making it” (Mark Twain)
So you’ve decided to buy your first house – exciting! There’s nothing like owning and living in your very own dream house, and if you choose wisely your home could well be one of your most important investments ever.
Get started with these tips –
First, understand how much cash you will need
Make a list of all the costs you need to plan for (there are plenty of convenient online calculators to help you figure out what your transfer and bond costs are going to be so Google for one that suits you) –
- Deposit: Unless you pay the whole purchase price in cash, you will need to raise a bond. You may qualify for a 100% bond, otherwise be ready to pay at least 5% – 10% of the price as a cash deposit. Of course, there may be benefit in paying more if you can afford it.
- Bond registration costs: The bank’s attorneys will register your bond and you will need to pay them the registration costs. The bank will also charge you a bank initiation fee.
- Transfer costs: Standard procedure (unless your sale agreement provides otherwise) is for you to pay the transfer costs, even though it is usually the seller who chooses the conveyancing attorney.
- Transfer duty: This government tax is payable unless there’s VAT on the sale, and the sale agreement will almost certainly provide for you to pay it. No duty is payable on a property valued up to R900,000 and a sliding scale applies to houses above that threshold.
- Associated costs: Make a list – moving, redecorating, furnishing, Internet connections and so on. Don’t forget this step, these costs can add up alarmingly!
So what’s your price range?
You now have your figure for one-off costs, but before you finalise your budget make provision also for all your new ongoing costs as they will all affect long-term affordability –
- Recurring and monthly costs: Rates/taxes/levies, homeowner’s insurance, water, electricity and so on. Provide also for both short- and long-term maintenance costs for both home and garden.
- Your bond repayments: This is the crunch – will you be happy with the lifestyle you can afford after paying your bond every month? When you first apply for a bond shop around for the best interest rate and – this is vital – be absolutely sure that you will always be able to afford the monthly payments, even when (not if) interest rates start rising again.
Get a bank pre-approval here – with today’s restrictions on credit grantors when it comes to responsible lending practices, it will help you gauge affordability. And as a bonus, it gives you a great negotiating tool when you move on to the offer stage!
The end result – you have your budget, that gives you your price range, and you can move on to…
Lots of questions to ask yourself here of course –
- Location, location, location: What area/s will you concentrate on? Where do you want to live? What sort of lifestyle are you after? What amenities do you want close by? Research the area – what are average selling prices in the suburb and is your budget up to it? Do houses in the area have a history of good value growth? What are crime levels like?
- Searching: With your price range and the target area in mind, the “thrill of the hunt” is at last upon you! Online searches are increasingly popular but choose whichever channel or channels you are comfortable with.
- If buying in a community scheme: Check what Rules and Regulations you are letting yourself in for – you will be held to them. Make sure that the Home Owners Association or Body Corporate’s finances are sound (ask for audited financials and management accounts). Ask about any special levies or other planned expenditure on the horizon (get it in writing).
- Plans, defects and the rest: Ask for copies of approved building plans (check for any unlawful structures or deviations from plan), look for and ask about defects like leaking roofs, problem foundations etc – consider getting a full professional report unless you are very sure of your own abilities in this regard.
Approach your choosing and purchasing decision as though it’s the most important financial decision you will ever make (it may well be).
Making an offer, and the legal bits
So now you’re ready to make your offer on a house. Excitement mounts – will the seller accept? Or perhaps counter-offer? You can’t wait to find out. You are presented with a Deed of Sale, a pen and a cheerful “just sign here, we’ll do the rest”.
Hold on a second!
Take no chances here. Before you sign anything, have your lawyer check the paperwork for you, with a Deeds Office search for anything that may affect your decision-making such as restrictive title deed conditions, servitudes (giving other people rights over your property) etc, etc.
Remember also that with property sales what counts is what’s in writing so tell your lawyer about any verbal undertakings or disclosures given to you.