The cost of buying a home

As well as your monthly home loan repayment, there are other costs that apply when you buy a property. These include:

Once-off costs
These are usually paid up-front when you buy a home and include the deposit, bond registration fee, transfer fees, property assessment cost, a home loan initiative fee and deeds office registration fee. Some of these fees will be charged to your home loan account.  A monthly administration fee will also be charged by your bank, which will be included in your monthly home loan repayment.

 

Interest
Another important consideration is the interest that is charged on your bond.  Should the interest rate go up, you need to be sure you will still be able to afford your monthly instalments.  There are two interest rate options to choose from:

  1. Fixed rate
    For the fixed rate option, you pay a fixed instalment for an agreed period of time. The fixed rate duration ranges from 12 months to 36 months. The main difference between a fixed rate and a variable rate is that the instalment with the fixed rate does not change with interest rate changes during the ‘fixed period’.
  2. Variable interest rate
    A variable interest rate option changes as interest rates change. When interest rate changes, the monthly instalment will also change, either decreasing or increasing depending on which way the interest rates go.

Insurance
You will be required to take out Home Owners insurance to protect your property against floods/fire and other damage.  This insurance premium is included in your home loan repayment.

You will also have to take out a Home Loan Protection plan which will pay off your home loan in the event of your death –giving your family the peace of mind that they will always have a roof over their heads. You may also want to take out retrenchment and dread disease cover to ensure that you will be able to meet your monthly expenses if you are unable to continue working.  

Remember: It’s always a good idea to try and pay your home loan off sooner! Paying a little extra into your home loan account every month will reduce the interest and shorten the term of your loan.

Next article: Affordable Housing Options