House buying basics
With the interest rate at its lowest for 22 years, many people are thinking about buying property for the first time. However, the complex legal terms, hidden costs and convoluted process can be confusing, so we've put together some practical pointers to guide you through the maze…
There are basically two options you can choose from — a freehold property or a sectional title unit. A freehold property (which includes a cluster home) is normally registered in your own name and you can manage your property as you like, obviously within the limits of municipal bylaws. You are responsible for maintenance and improvements.
A sectional title unit is usually a flat or a townhouse. You buy more than just the unit as you share common property like the garden, a pool and security services. These are paid for via a monthly levy. The unit owners elect trustees to a body corporate, which handles administration, maintenance and other matters.
The easiest and most common way to own property is to register a property in your name or jointly with another person. You can also buy a property through a company, close corporation or trust — check what’s best for you with a good personal financial advisor. If the property is already registered in one of these bodies, you don’t pay transfer duty when you buy the property.
Unless you are lucky enough to pay cash for your house, you’ll need to apply for a homeloan. The general rule is that your monthly homeloan repayment shouldn’t be more than 30 percent of your gross monthly income. Your partner’s income is also taken into account.
Keep in mind that the cost of owning a home is far more than just your monthly homeloan repayment. You’ll need to budget for life insurance premiums, insurance for buildings and household contents, rates, taxes, water and electricity, maintenance and moving costs. Don’t be afraid to ask your bank for advice on these costs, or anything else to do with buying the property.
If you’re unsure about how much you qualify for, apply for a preapproval certificate that guarantees a homeloan. This gives you more confidence and authority when you start house hunting as you already know the size of your homeloan.
Offer to purchase
If you decide to buy a property you have to sign an offer to purchase, and the seller can accept or reject this within the time period you specified. On acceptance it becomes a legally binding contract, so before signing check the following:
In addition to the above, also look out for the following important clauses in the offer to purchase.
You may have to pay a deposit on signing the offer to purchase. This is generally paid to the estate agency or the attorney handling the property transfer. Both will have trust accounts to keep your money safe, but ensure you get the correct receipts and confirmation that the money has been paid into the trust account. Specify that interest on the deposit goes to you.
Applying for finance
Nowadays there are many homeloan options — you can get a very simple loan if you’re new to the property market; you need not pay your bond for the first three months; you can deposit extra funds to save interest, and so on. Speak to your bank and personal financial advisor to get advice on what’s best for your particular needs.
Interest rate options
A variable interest rate is linked to the prime lending rate; this means that when the prime rate changes, so does your homeloan rate.
You can, on the other hand, fix your homeloan rate for a certain time period, normally a year. This ensures that your repayments stay the same for that period, whatever the market does. When the fixed-rate period expires your homeloan rate will revert to the current variable rate, unless you choose a fixed rate again if that option’s available.
The legal process
When your homeloan has been approved, legal work begins. A transferring attorney (normally appointed by the seller) takes care of the transfer of the property into your name or a company, close corporation or trust. The bank appoints a registering attorney to prepare the bond contract and have it registered in the deeds office. The attorneys will call you within a few weeks to sign various documents needed to register the property transfer and bond.
At this stage you’ll need to pay several costs:
When the attorneys have arranged for cancelling any existing bonds over the property, registering the new bond and transferring the property, the documents are lodged with the deeds office. Then the new bond is registered and the property is transferred into your name (or a company, close corporation or trust.) The attorney lets the bank know and it pays the money for the property.
On registration your attorney should contact you to confirm that everything has been done successfully, and you will get a final statement of the account. The bank will send you a letter confirming your bond registration and the date of your first repayment. After that... move in and enjoy!
Article from: - www.iafrica.com