Congratulations on the purchase of your first property. While buying your first home is exciting, the process can often seem complex and feel overwhelming. With this guide we hope to provide some insight to first- time homebuyers.
1) The first step to buying a home is knowing what you can afford
It is important to understand your buying power and budget. A guideline for affordability is that, generally, your monthly bond repayment should not exceed thirty percent of your salary before deductions. We encourage you to contact your banker or a reputable mortgage originator for an accurate estimation based on your specific credit profile.
Mortgage originators are home loan specialists, who, at no cost to you, can assist with submission of your home loan application to all major banks, guaranteeing you the most competitive interest rate possible.
2) The offer to purchase – Putting pen to paper
Once you find your dream home, you will need to sign an offer to purchase. An offer to purchase, once accepted by the seller, is a legally binding agreement that is seldom cancelled without financial consequences. We strongly advise you to engage a conveyancing attorney to review and advise you on the contents and legal implications of the provisions contained in the offer to purchase before you sign it.
When buying through an estate agency, the agent must ensure completion and signing of a mandatory disclosure form by the seller in which all known defects to the property are disclosed. Do not solely rely on the form, but also conduct a thorough inspection of the property to ensure that you are fully informed of the condition thereof.
For more information on property conditions, please refer to our previous article on: https://www.adams.africa/property-law/what-to-know-about-a-property-condition-before-signing-the-agreement/.
3) Costs to budget for when purchasing a property
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- Transfer and bond costs – These costs are based on the property purchase price, or the bond amount granted and are payable to the conveyancing attorney attending to the registration of the transfer and the registration of the bond. These fees are usually charged in line with the tariff published annually by the Law Society of South Africa.
- Transfer duty – This is a tax payable to the South African Revenue Service (SARS) on the acquisition of immovable property with a value exceeding R1 100 000.00 (one million and one hundred thousand rands). You can use the cost calculators on our website to calculate the estimate transfer and bond costs as well as any transfer duty which may be payable to your transaction on https://www.adams.africa/property/property-calculators/.
- Administrative costs for obtaining the municipal rates and levy clearance certificates – These certificates confirm that there is no outstanding amount owed to the municipality or body corporate by the seller. The seller is responsible to settle any and all amounts owed to the municipality until the date of registration.
4) Costs applicable once you become an owner
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- Homeowner’s or sectional title insurance – This is a mandatory insurance for properties, and it covers the structure of the property and its permanent fixtures and fittings.
- Credit life assurance – This is not mandatory, but some banks may require it. This covers you if you can no longer repay your home loan due to death, permanent or temporary disability and terminal illness.
- Rates and taxes – This is a charge payable to the local municipality for the municipal services provided in relation to the property.
- Levies – This is a charge payable to the body corporate by owners in a sectional title scheme for insurance, maintenance, management, and security of the scheme.
5) The Conveyancing Process
A property transaction has three different conveyancers*
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- The transfer attorney – responsible for the transfer of the property from the seller to the purchaser. This attorney is usually appointed by the seller, but the attorney’s fees are payable by the purchaser.
- The bond attorney – responsible for the bond registration over the property. This attorney is usually appointed by the bank and the attorney’s fees are payable by the purchaser.
- The cancellation attorney – responsible for cancelling the seller’s existing bond over the property. This attorney is appointed by the seller’s bank and the attorney’s fees are payable by the seller.
*Refer to the following article for an explanation of the role and duties of a Conveyancer in South Africa on https://www.adams.africa/trending-topics/duties-of-a-conveyancer-in-south-africa/.
The process starts once the signed offer to purchase is provided to the transfer attorney. The transfer attorney drives the process and liaises with all the other linked attorneys. As the purchaser, you will only deal with the bond and transfer attorneys.
Once the documentation is prepared, you will be contacted to sign your bond and transfer documentation and once all the administrative and legal requirements of the transaction have been complied with, the matter will be lodged in the deeds office for registration. Please refer to the following article for an overview of the deeds office process on https://www.adams.africa/micaela-da-silva/understanding-the-deeds-office-and-registration-process/.
The right conveyancer can make all the difference in your property transaction – we welcome you to contact our expert team of conveyancers for any property related queries.
