5 Valuable Lessons for First-Time Home Buyers

As I think back to when I first purchased my first home, there were things I had to consider and plan for that I hadn’t even thought of. This was the biggest step I have ever taken and it was not only a financial decision but an emotional one too.

My first house hunting experience definitely taught me to go in with an open mind! My flat was not anything but move-in ready when I purchased it. The interior was not really that appealing but I loved the space and really saw myself in it.  Fortunately I didn't spend that much time house hunting. 

There were two homes that I looked at and really liked during the search for a new house but they were not within my price range. This was really important. I didn't want to live in a house that left me broke every month. 

Sadly, many home buyers don’t understand what they can afford and end up spending more than they should on buying and owning a home. I believe you should not spend more than 30% of your income after tax and deductions towards your monthly bond repayments. If it’s more than that, you can run into financial trouble.

Your credit score

When you apply for a home loan, the first thing that the banks will do is pull your credit report. Your credit score can determine whether your home loan gets approved and can also influence the interest rate that you will pay. Improving your credit score before applying for a home loan can save you thousands of Rands in interest.

Saving for a deposit

I recommend putting down the largest possible deposit. A sizeable deposit increases your chances of receiving a home loan and can lead to better interest rates. Banks typically require a 10% deposit on the purchase price of your home, but it can be as much as 30% depending on your credit score. Deposits are made in cash and are paid upfront and once-off to the conveyancing attorneys.

Saving for a deposit is a simple concept, but one that is often tough to execute successfully. Like any successful investment, saving for a deposit takes discipline and time. You need to start saving early and keep your goal in mind. In order to save up for a large deposit you may need to make some lifestyle adjustments, but this will almost certainly save you money for many years after buying a home.

The costs you can expect

1. Transfer duties

Transfer duties are a percentage of the purchase price of the home, depending on the legal status of the buyer. Companies and trusts are required to pay 8% of the purchase price, while individuals pay transfer duties on a sliding scale based on the purchase price:
Under R900,000: 0%
R900,000 — R1,250,000: 3% of the value above R900,000
R1,250,000 — R1,750,000: R10,500 + 6% of the value above R1,250,000
R1,750,000 — R2,250,000: R40,500 + 8% of the value above R1,750,000
R2,250,000 — R10,000,000: R80,500 + 11% of the value above R2,250,000
R10,000,000 and above: R933,000 + 13% of the value above R10,000,000

Transfer duties are often paid through your conveyancer at the point of purchase, otherwise it must be paid within six months of agreeing to buy your home (not the date of the completed sale). If you do not pay on time, you will be subject to interest of 10% per annum each month.

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2. Transfer fees (Conveyancing costs)

While the conveyancing attorney is appointed by the seller, the buyer is responsible for the transfer fees. This fee is payable to the conveyancing attorney for transferring the property into your name. The conveyancing attorney will use the Law Society’s recommended fee as a reference, but the fees are not fixed like transfer duties. Transfer fees are determined by a downward sliding scale based on the purchase price of the property. You can expect to pay anywhere in the range of 2% of the purchase price for a property under R1,000,000 to 0.5% for a property over R10,000,000.

Transfer fees must be paid before or at the time that the actual transfer of ownership takes place.

3. Bond registration fees

You are likely to be charged bond registration fees or attorney costs for the service of registering your bond at the deeds office. Bond registration fees range between R70 and R1,250 depending on the purchase price.

4. Your bank’s initiation fees

The National Credit Act now allows finance providers to charge their customers up to R5,985 (R5,250 + VAT) initiation fees.

5. Other costs

Buying and owning a home often brings about unexpected or hidden costs. These include rates and taxes, levies, insurance, water and electricity, improvements, repairs and maintenance. Be sure to include these in your financial planning before buying that dream home.

I wrote a post some time back on Here is how I learned that owning a house is expensive.

I certainly got an education when I purchased my first home. I could go on and on with the lessons I learned, but these are the biggies.

So should you buy a house now or wait?

The fact is that homeownership isn’t for everyone.  You’ll need to look at your personal situation–financial and otherwise–objectively to figure out if it’s the right move for you. Ultimately, you’re the only one who knows whether or not you’re ready to buy a home now or wait for a better time.

Are you a first time home buyer? What lessons can you share with the readers?