Transfer Costs Explained For First-Time Home Buyers

Most first-time home buyers do not anticipate what bond registration and transfer costs amount to. Here is a rundown of expenses to expect.
U
Melissa
Cohen
Published: Wednesday, May 24th 2017
General
For first-time home buyers, transfer costs can come as a bit of an unexpected (and un-budgeted for) surprise. After all the effort to save for a downpayment, and meticulously calculating your future property related costs down to the last cent, the last thing you want is extra expenses raining on your first-home parade. So here’s the lowdown to make sure you’re truly prepared to sign that offer-to-purchase.
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What Are Transfer Costs?

First and foremost, transfer costs are not synonymous with transfer duty on a property. Rather, transfers costs comprise of a number of expenses, including transfer duty, that needs to be paid to the transferring attorneys before date of bond registration. It includes the following:

1. Transfer Duty

Transfer Duty is a tax (payable to SARS) levied on the value of a property above R900 000, to transfer the property onto the buyer’s name. It is a Government Tax (payable to SARS) levied to transfer the property from the seller’s name into the buyer’s name. It generally constitutes the major portion of the costs involved. This accounts for quite a large proportion of the costs involved in purchasing a home. There is no Transfer Duty on properties under R900 000. SARS: These are the Transfer Duty rates applied to properties acquired on or after 1 March 2017, and apply to all persons (including Companies, Close Corporations and Trusts):
 VALUE OF PROPERTY (Rand) RATE
0 – 900 000 0%
900 001 – 1 250 000 3% of the value above R900 000
1 250 001 – 1 750 000 R10 500 + 6% of the value above R 1 250 000
1 750 001 – 2 250 000 R40 500 + 8% of the value above R 1 750 000
2 250 001 – 10 000 000 R80 500 +11% of the value above R2 250 000
10 000 001 and above R933 000 + 13% of the value above R10 000 000
  Former Finance Minister, Pravin Gordhan, announced in his budget speech in February that as of 1 March 2017, the threshold at which transfer duty applies will be raised from R 750 000 to R 900 000. Should you be buying a house for the first time, and the home costs around R1.5 million, you will be looking at paying around R51 000 in transfer fees. R25 000 will be for transfer duty, approximately around R20 000 for attorneys fees and another R5 000 in admin and VAT fees.  (No transfer duty is payable if the seller is registered as a VAT vendor; usually, the case when buying property in a new development where the developer is generally VAT registered. The seller must have included VAT in the purchase price.)

2. Transferring Conveyancers Fee:

This is payable to the Transferring Attorneys for getting your new home transferred from the old owner to you, and registering the property in your name. The amount varies depending on the property price and the law firm, but the fee is based on the Law Society’s recommended tariffs. According to various bond cost calculators, for a property of R1,5 million property, you can expect to pay somewhere in the region of R20 000.

3. Transfer Post, Petties, FICA and Other Fees

The is a levy to cover small expenses like posting documents to other parties, including you. The amount, once again, varies from law firm to law firm. But it’s usually fixed. Look at spending somewhere in the region of R1 000.

4. Property Transfer Deeds Office Registry Fee

This is another government cost payable to the Deeds Office (but that’s facilitated by the Transferring Attorneys) for the Title Deed and legal transfer and registration of your new home into your name. The amount is fixed according to the purchase amount.
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What Are Bond Costs?

Yes, there are more costs. Bond costs are payable to the bond registration attorneys before date of registration. It amounts to less than the accumulative transfer costs and includes:

1. Bond Registration Conveyancing Fees

They are for the service the bond registration attorneys provide to get your bond registered. The fee is based on tariffs recommended by the Law Society. But the amount will vary according to your home loan amount and may differ from one law firm to another.

2. Bond Registration Post, Petties, FICA and Other Fees

The Registering (Bond) Attorneys also charge a levy to cover small things like posting documents. Similar the transfer petties, expect to pay around R1 000.

3. Bond Registration Deeds Office Registry Fee

This is a fixed fee charged by the Deeds Office for the legal registration of your mortgage bond; the amount is determined by the amount of your home loan.
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