What it costs to buy a home

Here are a few things to factor into the costs that apply when buying a property:

1. Bond and interest rates

Bond Repayments: The biggest cost when buying a property is typically the bond itself. This includes the principal loan amount and the interest paid over the life of the loan. South African banks offer various bond products, and the interest rate determines your monthly repayments and the total cost of the loan.

Interest Rate Fluctuations: Interest rates in South Africa can vary depending on the economic climate, your credit score, and the terms of your loan. The South African Reserve Bank (SARB) will sometimes adjust the repo rate, which influences the interest rates offered by banks. The repo rate is the interest rate that the South African Reserve Bank uses to loan money to South African banks. Even a small increase in interest rates can add thousands of rands to the cost of your bond over its term.

2. Insurance

Homeowners Insurance: This is one of the most important expenses for most bondholders. Homeowners insurance covers damages to the property due to fire, theft, natural disasters, and other risks. The cost depends on the location, size, and age of the home, as well as the coverage limits.

Bond Insurance: Some banks may require you to take out bond insurance which ensures the outstanding bond amount is covered in case of death, disability, or critical illness.

3. Maintenance and repairs

Owning a home means you are responsible for all maintenance and repair costs. This can include everyday tasks like garden care, pool maintenance, and servicing of electrical and plumbing systems, as well as unexpected repairs such as fixing a leaking roof or replacing a broken geyser.

Home Maintenance: It's generally recommended to budget 1-3% of the home's purchase price annually for maintenance. For example, on a R1,500,000 home, you might need to set aside R15,000 to R45,000 each year.

4. Property taxes

Rates and Taxes: Municipalities charge rates and taxes based on the value of your property. These funds contribute to local services such as waste removal, road maintenance, and public services. Rates depend on the location and value of your property.

5. Rates and Levies

Depending on your location, you may also be responsible for various rates and levies. These can include:

Levy Fees: If your home is part of a sectional title scheme or estate (in estates, flats or apartment complexes), you will likely have to pay monthly or annual levies. These fees cover the maintenance of common areas, security, and sometimes additional services like garden services and the upkeep of communal facilities like pools, parking areas and entertainment areas.

Utility Costs: As a homeowner, you'll be responsible for all utility bills, including water, electricity, sewage, and refuse removal. These costs can add up, especially if you live in a larger home or an area with high utility rates.

Buying a home in South Africa involves much more than just the purchase price. Understanding and budgeting for these additional costs can help you make a more informed decision and avoid financial surprises down the road. Homeownership can be incredibly rewarding, but it's important to go into it with a full understanding of the true costs involved.