Authors: Legal & Tax
The A-Z of buying your first home
A guide for first-time home buyers
Buying a new home can be a challenging and complicated process without the correct guidance and expert advice. We’ve put together a step-by-step guide with all the requirements you should know.
It’s a big deal
Buying a house and moving in together is not just a big step forward in your relationship but also a huge milestone – which can be as scary as it is exciting. The whole process can be very overwhelming, but it doesn’t have to be – with the right guidance and clarity regarding what to expect, we can help make it less stressful so you can focus on the good stuff.
From the top
She said yes, or he said yes. But, it is a clear yes, you are moving in together and the house hunt is on! BUT, don’t just jump straight online to view places, you first need a clear idea of what you are looking for and what you can afford. And if you need a loan, will you qualify for one?
You’ll need a good credit score to acquire a home loan. Your credit score is a three-digit number between 000-999. +600 puts you at a fair chance of getting your home loan approved. If you are not where you need to be you can improve your credit score by doing the following:
- Pay your accounts in full and on time.
- Keep your credit card debt low because of the high interest rates attached to credit cards.
- Pay low instalments on outstanding amounts over an extended period as opposed to not paying for long periods and only paying occasionally.
- Avoid owing more than a third of your gross income on debt.
- Avoid spending up to your credit limit.
Once ready, apply for a loan from your bank or a bond originator.
Lifestyle and needs vs what you can afford
Be realistic about what you can afford. It is also important to consider the extra costs that come with owning a property like maintaining a pool and garden.
If you can put down a deposit for your property, doing so will up your chances of getting your home loan approved. Your repayment interest rate will be better and your monthly loan repayments will be lower.
All the right documents
Let’s get all your paperwork together:
- A copy of your ID.
- Proof of income – a salary slip, not older than two months. If you are self-employed, you’ll need a letter from your accountant confirming your income or statement of your assets and liabilities.
- Six months of bank statements.
- A copy of the offer to purchase with both yours and the seller’s details.
Offer to purchase
You knew you wanted the house the minute you walked in. Now to make sure it’s yours! You have your bond pre-approval, the next step is to sign an Offer to Purchase (OTP), but, before you do so have the property inspected. Make sure you clearly state your terms for making your offer and understand their terms on accepting. The Offer to Purchase is a legally binding document so do not sign unless you are certain and understand the terms and conditions.
What comes next? – The registration and transfer process
- Once the seller signs the OTP it becomes the Deed of Sale (which might be subject to conditions like bond approval, but once met, the contract is binding).
- The Conveyancer prepares the required documentation, including the Deed of Sale to submit the transaction to the Deeds Office to effect the transfer.
- A municipal clearance certificate is then requested from the municipality for rates and taxes.
Before submitting documents to the deeds office:
- The purchaser may have to pay the Transfer Duty and registration costs.
- A Tax Clearance Certificate (for the seller) is needed from the South African Revenue Service (SARS).
- At the time agreed in the Offer to Purchase, a deposit for the balance of the purchase price must be made into the Conveyancer’s trust account.
- Should a bond be registered over a property, a Bond Attorney is appointed to cancel the bond registration.
- If the buyer’s new property is worth over 1 million Rand, there is a Transfer Duty fee outstanding to SARS.
The transfer process usually takes two to three months; your conveyancer should keep you informed of the process.
Not married? Who owns what?
Put aside the romantic stuff and treat buying a house together like you would any other business deal. You need a legally binding agreement to protect both of your interests in case something goes wrong.
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