The cash amount you will need to buy a home depends on a number of factors, including the cost of the house and the type of mortgage you get.
In general, you need to come up with enough money to cover three costs:
The Deposit
The deposit you make on the home when your offer is accepted. A substantial deposit proves to the seller that you are serious about buying his house. When you pay the deposit, you're real estate agent or the transferring attorney will put your deposit money into a trust account.
At transfer, your deposit will be applied to the purchase price, transfer costs and taxes. If the sale "falls through" and transfer does not take place, your money will be returned to you.
The deposit amount depends solely on you.
The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require a deposit of 10-20% of the purchase price, but loans for 100%, or more, can sometimes be obtained.
Transfer costs
Transfer costs are the legal fees and the costs associated with processing the paperwork to buy a house.
Transfer costs is an average 3-4% of the price of your home. This includes bond registration fees, deed searches, deed registration fees, stamp duty, and sundry expenses like courier costs.
When you make an offer, your real estate agent will provide a breakdown of the estimated costs, so you won't be caught by surprise.
You can calculate the amount of transfer costs using the RealFact transfer cost calculator.
Tax or Duty
The government needs to get their "cut" of every property transaction.
If you buy the property in your own name, the tax man gives you a big break, compared to buying in a legal entity like a company, CC, or trust. These legal entities pay 10% of the purchase price in transfer duty, regardless of the price.
Buying in your own name, you don't pay a cent of transfer duty for the first R190 000, 5% on the amount above that, up to R330 000, and only 8% on the amount above that.
You can calculate the amount of transfer duty using the RealFact Transfer Duty Calculator.
Cash To Buy A Home
The more of your own cash you are willing to put down to purchase a home, the more comfortable lending institutions are in lending you the balance. The lenders feel more secure if you also have something to lose if they have to forclose on the property.
