The current low-interest environment presents an ideal opportunity for homeowners to upgrade their existing accommodation by buying a bigger home to meet their needs. A more expensive home means higher monthly bond repayments, added responsibility, and a layer of other costs that need to be accounted for.
Costs associated with selling your existing home
When placing your existing home on the market keep in mind that, as the seller, you are responsible for paying the estate agent’s commission. As such, it is important to negotiate these fees upfront as it will have a direct impact on the amount you net from the sale of your home. The standard estate agent commission rate in South Africa is between 5% and 7%, but this can be negotiated.
In order for the transfer to take place to the new owners, you will need to obtain an Electrical Certificate of Compliance (ECOC) for your existing property. This document verifies that all the electrical installations in your home, such as plugs, lights, DB Board, geyser and wiring, comply with the legislated requirements. If you have maintained your electrical compliance during the course of your ownership, then you can expect to pay around R1 500 for a standard domestic ECOC. Keep in mind that many banks will insist on a copy of your ECOC before bond registration can take place and without a valid ECOC transfer can be delayed. If you haven’t maintained the electrical compliance of your property, you may need to outlay some capital to ensure that you meet the criteria. In addition to your electrical compliance, you will also need to factor in the costs of water, beetle, gas and electrical fence inspection, each of which costs in the region of around R500.
Another potential expense that should be considered is that of building plans for your existing property. A purchaser may insist on proof of approved plans when putting in an offer to purchase and can include a suspensive condition to this effect in the offer. Further, some financial institutions may only grant a loan on receipt of approved plans in respect of the property being purchased. If you do not have approved plans for your property, you may need to incur architectural costs to have plans drawn.
Lastly, when selling your existing home, keep in mind that you will be required to pay off your home loan and pay a bond cancellation fee to the bank. Generally speaking, banks require 90 days written notice of your intention to settle the bond so it is advisable to let your bank know when you place your property on the market.
Costs associated with purchasing your new home
Upon the purchase of your bigger home, you may be required to pay a deposit on the property, depending on your credit rating and/or the terms of the finance offered by your bank. When taking out your home loan, you will also be required to pay a once-off bond initiation fee which is capped at R5 000 which can either be paid upfront or capitalised to your loan amount. As a purchaser, transfer duty is one of the biggest costs you will need to budget for, keeping in mind that transfer duty is owed over and above the selling price and is based on the value of the property, not the price of the property.
Not to be confused with transfer duty, transfer costs are the professional fees that you will need to pay to the transferring attorney which covers the cost of registering your ownership of the property with the Deeds Office. In addition to these costs, you will be required to pay a bond registration fee to the bond attorney who will register the bond at the same time that transfer takes place. When purchasing a property, ask the attorneys for a breakdown of the costs so that you can prepare for them accordingly and are not taken by surprise at the last minute.
Storage, moving and setting up costs
When planning the move to your new home, it helps to plan the logistics and timeline and to attach costs thereto. The costs of transport and storage can vary greatly depending on which removal company you use, the type of services you opt for, the location of your new home, the nature and value of the contents to be transported, and whether you require any specialised services such as the transport of a piano, crating of artwork, or hoisting of large furniture.
If you’re planning to do renovations to your new home, you may need to budget for the services of a draughtsman or architect if your renovations require plans to be drawn up. Other costs to factor in include security upgrades in the form of alarm systems, electric fencing, garden beams and additional gate controls. Many services will require that you pay deposits and/or installation fees, including landline installation, fibre, networking, and gas. Having more space may mean that you need to purchase additional furniture and appliances, and incur costs on furnishings such as blinds, carpets, curtains, light fittings, bathroom fittings and plumbing connections.
Additional monthly line items
Once you’ve moved into your new home, you will need to update your monthly budget to account for the additional line items expenses that you can expect to pay. If you’ve financed the purchase of your property through a home loan, use a bond calculator to determine the new bond repayments you can expect to pay. Remember, interest rates are particularly low at the moment so be sure to leave wiggle-room in your budget in the event that interest rates increase.
If you’ve purchased a freestanding property, you will be charged a monthly amount for sewerage facilities, roads maintenance, street light maintenance and refuse collection, and these rates are based on the market value of your property. You should be able to access an online municipal rates calculator for your area so that you can get a good idea upfront as to what these costs will be. A larger house and property may also mean higher energy and water costs, and the seller should be able to give you a good indication of what these costs are on a monthly basis.
From an insurance perspective, many banks will insist that you have life cover in place to the value of your home loan, so if you need to increase your life cover for these purposes, don’t forget to factor in the increased monthly premium. You will also need to adjust your short-term cover to ensure that the building and contents of your new home are adequately insured, and to include these adjusted premiums into your new budget.
A larger home and/or garden may require that you allocate more to your cleaning and maintenance budget. The upkeep of high-end amenities such as jacuzzis, rim-flow pools, Khoi ponds, motorised blinds and landscaped gardens can increase your costs considerably, not to mention the time commitment required for such upkeep. Be sure to adequately factor in the costs of pool and garden maintenance, domestic cleaning, and other specialised services that may be required.