Buying property in South Africa is one of the biggest investments you will make in your lifetime. Therefore, it is crucially important to understand everything in the purchase equation, particularly the fees.
In a nutshell, over and above the actual cost of the property, a buyer needs to set aside money for bond origination costs, transfer fees and transfer duties. The bond repayment is made to the bank every month for the agreed-upon period, transfer duty is a tax based on the value of the property and is paid to SARS, while the transfer fees cover the costs for transferring the property into the buyer’s name (the conveyancing fees) and for registering a bond.
“Once a bond has been granted and the buyer has accepted it, he or she will pay fees to register the bond and to transfer the property. The buyer will always be required to pay these fees, while transfer duty needs only be paid if the property costs more than R900 000,” says Grant Wheeler, Director of Strategy and Expansion: Engel & Völkers Southern Africa.
How much are the fees?
“As a rule of thumb, the buyer should allow for between 8% and 10% of the amount of the purchase price for all the other costs involved in purchasing the property excluding a potential deposit. In addition to these expenses, buyers should also make provision for additional charges, which can include rates and clearance certificates and prospective taxes amongst others,” says Wheeler.
Bond registration costs
Conveyancer’s Fee
The conveyancer's fee for bond registration covers the service of getting the bond registered over the title deeds. The amount varies in relation to the home loan amount. While the fee is based on tariffs recommended by the Law Society, it may differ slightly from one law firm to another.
Examples: • On a bond of R 650 000.00 the fee is approximately R 8 400.00 excl. VAT. • On a bond of R 2 000 000.00 the fee is approximately R 16 560.00 excl. VAT.
There are also sundries to be paid. The amount is usually fixed and each law firm has its own rates. The average is R650.00 excl. V.A.T. per bond. The charge covers small things like posting documents to other conveyancers, the bank, the estate agent, the Deeds Office, to the buyer etc.
Attorney’s Fees are always subject to VAT being added.
Deeds Office Registry Fee
This fee is charged by the Deeds Office for the legal registration of the mortgage bond.
As per the Deeds Office schedule of fees for 2018, the amount is fixed according to the amount of the home loan.
Home Loan
(i) does not exceed R150 000 - fees will be R376,00
(ii) exceeds R150 000 but does not exceed R300 000 - fees will be R486,00
(iii) exceeds R300 000 but does not exceed R600 000 606,00
(iv) exceeds R600 000 but does not exceed R800 000 - fees will be R852,00
(v) exceeds R800 000 but does not exceed R1 000 000 - fees will be R978,00
(vi) exceeds R1000 000 but does not exceed R2 000 000 - fees will be R1 098,00
(vii) exceeds R2 000 000 but does not exceed R4 000 000 - fees will be R1 522,00
(viii) exceeds R4 000 000 but does not exceed R6 000 000 - fees will be R1 846,00
(ix) exceeds R6 000 000 but does not exceed R8 000 000 - fees will be R2 197,00
(x) exceeds R8 000 000 but does not exceed R10 000 000 - fees will be R2 568,00
(xi) exceeds R10 000 000 but does not exceed R15 000 000 - fees will be R3 057,00
(xii) exceeds R15 000 000 but does not exceed R20 000 000 - fees will be R3 671,00
(xiii) exceeds R20 000 000 but does not exceed R30 000 000 - fees will be R 4 278,00
(xiv) exceeds R30 000 000 - fees will be R6 113,00
The transfer also needs to be registered with the Deeds office:
Purchase Price/ Value of Property (whichever is greatest)
(i) does not exceed R100 000 - fees will be R36,00
(ii) exceeds R100 000 but does not exceed R200 000 - fees will be R78,00
(iii) exceeds R200 000 but does not exceed R300 000 - fees will be R486,00
(iv) exceeds R300 000 but does not exceed R600 000 - fees will be R606,00
(v) exceeds R600 000 but does not exceed R800 000 - fees will be R852,00
(vi) exceeds R800 000 but does not exceed R1 000 000 - fees will be R978,00
(vii) exceeds R1000 000 but does not exceed R2 000 000 - fees will be R1 098,00
(viii) exceeds R2 000 000 but does not exceed R4 000 000 - fees will be R1 522,00
(ix) exceeds R4 000 000 but does not exceed R6 000 000 - fees will be R1 846,00
(x) exceeds R6 000 000 but does not exceed R8 000 000 - fees will be R2 197,00
(xi) exceeds R8 000 000 but does not exceed R10 000 000 - fees will be R2 568,00
(xii) exceeds R10 000 000 but does not exceed R15 000 000 - fees will be R3 057,00
(xiii) exceeds R15 000 000 but does not exceed R20 000 000 - fees will be R3 671,00
(xiv) exceeds R20 000 000 - fees will be R4 890,00
Transfer Duty
Transfer duty is a tax that is payable to SARS and is based on the value (not the selling price) of a property.
Below are the transfer duty rates applicable on property purchased between 1 March 2018 to 28 February 2019:
Value of property: 0 – R900 000
Rate: 0%
Value of property: R900 001 – R1 250 000
Rate: 3% of the value above R900 000
Value of property: R1 250 001 – R1 750 000
Rate: R10 500 + 6% of the value above R 1 250 000
Value of property: R1 750 001 – R2 250 000
Rate: R40 500 + 8% of the value above R 1 750 000
Value of property: R2 250 001 – R10 000 000
Rate: R80 500 +11% of the value above R2 250 000
Value of property: R10 000 001 and above
Rate: R933 000 + 13% of the value above R10 000 000
Bond Initiation Fee
A Home Loan or Bond Initiation Fee is charged by the bank for the processing of the bond application. Some banks work on a base fee plus a percentage of the loan amount, other banks charge a flat rate of approximately R6037.00 (Incl. VAT).
“A reputable real estate company will assist buyers to understand the fees and expenses involved in the purchase of property. Ensure that you deal with a company that is professional and offers comprehensive advice, especially if you are a first time buyer,” concludes Wheeler.