Buying your first home

BUYING a home can be a daunting task and for a first-time home buyer, there are many unforeseen steps and hidden costs.

Being methodical and thorough in your house hunting and in the buying process could save you from making a poor investment, or overcommitting yourself financially.

Home loans and affordability

Saving for a home loan is the first vital step in becoming a homeowner.

A deposit will be taken into consideration when calculating your affordability score, and the greater your deposit, the lower your monthly repayments will be, making your bond repayment more affordable.

Before applying for a home loan, it is wise to calculate how much you can afford to pay towards monthly bond repayments.

This can be done simply using Property24.com’s Affordability Calculator, and a general rule is to limit your monthly instalments to less than a third of your net income.

Monthly instalments and the interest rate

Your monthly instalments are made up of the amount needed to repay the loan amount and a portion of the interest on that loan.

From the moment the property is registered in your name, you are liable for these monthly payments, which will continue for the duration of the loan agreement.

Interest is added to your loan amount as a lending fee, and the interest rate is based on the prime interest rate and will be specified in your loan agreement.

As interest rates fluctuate over time, your monthly instalments may decrease or increase accordingly, and therefore it is a good idea to make sure you can afford such an increase should it occur.

Hidden costs

In addition to bond repayments, homeownership comes with many expenses, and to avoid financial pressure, these should be considered at the outset.

These additional costs include water and electricity charges, rates and taxes, levies for a sectional title property, and homeowners’ insurance for loss or damage to your property.

The Offer to Purchase

Thorough research is essential to make a sound investment.

This can be achieved through a property valuation performed by your estate agent, or you can download a full Property Valuation Report for your selected property through Property24.com.

With this research in hand, you can negotiate the terms of the Offer to Purchase.

The Offer to Purchase contains all terms and conditions agreed upon by the buyer and seller, such as the sale being subject to bond approval or to the sale of another property within a specified period of time.

It is also common for the property to be sold voetstoots. This means it is sold with all defects and faults, and it is therefore advisable to inspect the property carefully and negotiate any necessary repairs as part of the Offer to Purchase.

Once signed by both parties, the Offer to Purchase constitutes the Deed of Sale and becomes legally binding. An attorney can assist to ensure the contract meets the necessary requirements and that the process is smooth.

The transfer process

Step 1:  The Transfer Attorney, appointed by the seller, prepares the necessary documentation including the Title Deed, Rates Clearance Certificate (proof from the municipality that rates and taxes are up to date) and cancellation figures from the bank.

The buyer will pay transfer duty (for a property worth more than R600 000) and conveyancing fees charged by the Transfer Attorney.

Step 2:  The Bond Attorney prepares the bond documentation with the buyer, including the home loan account.

Step 3:  Once received, the transfer attorney will submit these documents to the Deeds Office and the

Cancellation Attorney will receive copies for cancellation of the seller’s bond.

Step 4:  Once all documents have been signed and costs paid, the information will be simultaneously lodged at the Deeds Office by the relevant attorneys for verification. Once verified, all attorneys will be notified.

Step 5:  On the day of registration, the bank pays out the home loan amount and the buyer officially becomes the owner of the property.

As the process can be a lengthy one, do make sure that all the necessary information is submitted and all the required steps are taken to avoid unnecessary delays in the registration process.

*Article courtesy Property24, Fin24’s sister publication and SA’s leading property portal offering houses for sale, and property to rent in South Africa.