It is a fact of life that everyone does it – sign on the dotted line without reading the fine print.
I am not suggesting that sales contracts – when you are buying a property – are fine print, far from it.
What I am suggesting is that you should know what you are doing when you buy property – it can kill you financially if you don’t.
When buying a house, especially for the first time, you are likely not to understand what is happening.
Buying the house is just the start of the process and it is vital that you understand what you are letting yourself in for.
Firstly, you are likely to take out a bond from a bank to pay for the property.
That means that you owe that money to the bank plus interest.
You don’t want a bond but it is the only way that most people can buy a property.
If you pay after the interest calculation date you will be charged extra interest – pay on time – you need to know what date the interest is calculated on.
Pay four days before this date – it could take a few days for the money to be paid off your account due to interbank time lags.
If you owe R1-million and pay say R10 000 before the calculation date you will be charged interest on R990 000 not R1 000 000.
The difference in interest will be small, around R67 but that is R67 rand every month for 20 years or R16 000 – though it is actually much more because your bond would be that much less every month.
Secondly, while they will tell you what the bond and transfer costs are (sometimes!) they seldom tell you what the initiation costs are at the bank when you take out a new bond.
This can easily be close to R10 000 that you need to have in cash.
Then while the bond payment can be calculated on the bond you applied for and the interest rate that they are charging, there are always monthly service fees and these can vary hugely from bank to bank – ask what they are.
On top of that you need to take out insurance on the property that you bought.
Remember that you are not forced to take out the insurance from the bank that gave you the loan.
Ask your broker for a quote – these are often cheaper.
Then remember that you must pay rates and taxes each month for your new home.
If you don’t, the municipality will sue you and take your home to auction.
Ask what the rates and taxes are before you sign.
Then there is the levy that must be paid for a sectional title scheme and/or Home Owners Association (HOA) fees.
Wild Olive in Bloemfontein is an HOA area so if you buy there you could be paying rates plus a levy in your scheme plus the HOA fee.
Just make sure that you know what the full costs are.
Then there are water and electricity bills to pay – some of us come from areas where these are standard fees or not paid at all.
It is not that anyone is trying to cheat you, but you need to know what all these costs are, how much they are and you must know that you have the income to pay them.
If you cannot afford to pay all of them then you cannot afford to buy the property.
- Mike Spencer is the founder and owner of Platinum Global. He is also a professional associated property valuer and consultant with work across the country as well as Eastern Europe and Australia.