Introduction
Buying a home is one of the biggest financial decisions you’ll ever make. It’s exciting—but without proper preparation, it can lead to stress and unexpected costs. Before you sign an Offer to Purchase, here’s what you need to check and do from a financial perspective to ensure a smooth and sustainable homeownership journey.
1. Assess Your Affordability
Before house hunting, determine what you can realistically afford:
- Do a Full Budget Analysis: Your monthly bond repayment should ideally not exceed 30% of your gross income. Factor in other debts and living expenses.
- Run Affordability Simulations: Use online bond calculators to estimate repayments at current and slightly higher interest rates (to prepare for rate hikes).
- Avoid Buying at Your Maximum Limit: Leave a buffer for emergencies and future expenses.
2. Check Your Credit Score
Your credit score is critical for home loan approval:
- Minimum Score: Most banks require 610+, but 650+ improves approval chances and 700+ may qualify you for better interest rates.
- Improve Your Score: Pay bills on time, reduce debt, and correct errors on your credit report.
- Get Pre-Approved: Pre-approval strengthens your negotiating position and shows sellers you’re a serious buyer.
3. Save for a Deposit
While some lenders offer 100% bonds, a deposit of 10–20%:
- Reduces your loan amount and monthly repayments.
- Improves your chances of approval.
- May qualify you for preferential interest rates.
4. Understand All Costs (Beyond the Purchase Price)
Hidden costs can add 8–12% to the property price. Budget for:
- Transfer Duty: Tax payable to SARS (0% below R1.1M; up to 13% for high-value properties).
- Conveyancing Fees: Legal costs for transferring ownership (R7,000–R50,000+ depending on property value).
- Bond Registration Fees: Paid to the attorney registering your mortgage.
- Bank Charges: Bond initiation fee (up to R6,037) and monthly admin fees.
- Insurance: Homeowner’s insurance and life cover (often required by banks).
- Moving Costs: R2,000–R20,000 depending on distance.
- Municipal Deposits: For water and electricity connections.
- Rates, Taxes & Levies: Ongoing monthly costs for municipal services and sectional title properties.
5. Factor in Long-Term Expenses
Owning a home comes with ongoing costs:
- Maintenance & Repairs: Budget for upkeep and unexpected fixes.
- Security: Alarm systems, fencing, or estate levies.
- Utilities: Electricity, water, refuse removal.
- Special Levies: For sectional title units when major repairs are needed.
6. Verify Legal & Compliance Requirements
Before committing:
- Rates Clearance Certificate: Confirms no outstanding municipal debt.
- Compliance Certificates: Electrical, plumbing, gas, and beetle (where applicable).
- Approved Building Plans: Ensure all structures are legal.
- Title Deed Check: Verify ownership and any restrictions or servitudes.
7. Prepare Documentation for Your Home Loan
Banks will require:
- South African ID.
- Latest payslips and proof of income.
- 3–6 months’ bank statements.
- Offer to Purchase.
- Tax number and proof of address.
Conclusion
Buying a home isn’t just about finding the perfect property—it’s about financial readiness. By checking your affordability, improving your credit score, saving for a deposit, and budgeting for hidden costs, you’ll avoid nasty surprises and secure your dream home with confidence.