Real Estate Investor Magazine South Africa August/September 2019 | Page 23

FINANCE
P
icture walking into a R2.3-million townhouse and
feeling like you are at home but, then someone
reminds you of the ‘hidden’ costs inherent in property
purchases.
Vera Nagtegaal, Executive Head at Hippo.co.za, says that
data from the FNB Home Loans’ affordability index shows
how financially trying the current economic environment
is becoming. This is compounded by the steep increases in
municipality and utility costs across the country.
Nagtegaal explains the cost of electricity has increased by
86.99% since the start of 2008 and is the biggest culprit of the
disposable income index.
Only 12.4% of homeowners are under the age of 30 in South
Africa. This is due to the weak economy and the slower pace at
which young people are entering the job market.
NUMBER CRUNCHING MADE EASY
Nagtegaal provides key advice for potential buyers.
“There’s no guarantee that a reputable bank will grant
you a 100% bond, so you’ll need to do your research about
the deposit required to make the bond affordable, as well as
calculate what the transfer fees might be,” she says.
With information at our fingertips, thorough research online
can help potential buyers understand bond costs. “It doesn’t
have to be a complicated exercise. Online calculators, such as
the one offered on Hippo.co.za, could help you calculate bond
affordability, bond repayment terms and attorney costs,” she
explains.
The platform also allows you to compare bank options
based on the minimum loan that you qualify for. For example,
on a property of R1-million, with a deposit of R200 000, paying
10% interest over 20 years, your monthly payment would be
around R7 720, with total once-off costs amounting to around:
Bond registration costs R25 607;
Property transfer costs R27 760; and
Bond initiation fee of R5 985
Banks will charge a bond initiation fee for processing home
loan applications. This is payable on a once-off basis upon the
registration of a bond and will most likely be added to the
home loan account. While some banks work on a base fee plus
a percentage of the loan amount, others charge a flat rate.
INSURANCE COVER
Nagtegaal points out that it is important to look at varying
insurance companies on offer.
“With the excitement of moving into your new home, don’t
forget to look into and compare the different types and brands
of insurance on the market,” said Nagtegaal
Some banks require prospective buyers to take out life
insurance when purchasing a home of up to R1-million.
Nagtegaal adds that it can be devastating when one member
of a married couple dies and his or her partner is forced to sell
the home because they are not able to afford the monthly
bond payments.
“Your bond originator may have a partnership with a
reputable life insurance company that can offer clients
competitive rates,” she advises.
Homeowners insurance is an important aspect when
budgeting for a property. “Your bank will specify that you
must have homeowners’ insurance in place to cover any
potential structural damage to your property, which can be
included in your monthly bond payments. While it does vary in
amount according to the value of your home, you should also
investigate insurance to cover the contents of your home,” she
explains.
It is important to specify expensive items of furniture and
electronics that will otherwise be difficult to replace. If one has
a similar policy in place at their rented property, be sure to also
change the address on the insurance documents after moving
into a new property.
“Levies, municipal rates and taxes, electricity and an alarm
system for your home, these also add up. Overall, owning your
own home is arguably one of the biggest achievements of
adult life,” says Nagtegaal.
She says prospective homeowners should do their
homework to make sure they are not left out of pocket due to
unforeseen expenses.
SOURCES HWB communications
SA Real Estate Investor Magazine AUGUST/SEPTEMBER 2019
21