eBusiness Weekly
Kudzanai Sharara
First-time home buyers often make the mistake of thinking that the cost of buying a house is limited to the purchase price of the property, but this is often not the case, industry experts have said.
According to Simbarashe Mupfekeri, a local property consultant, there are other unforeseen costs associated with buying property, among them the transfer costs of the property as well as taxes.
“There are other additional costs associated with a bond such as bond registration fees of between three to four percent depending on the lender. Other cost considerations for buyers could be costs associated with conveyancing or transfer fees of between 6,5 to 7,5 percent,” said Mupfekeri.
The Zimbabwe Association for Housing Finance (ZAHF) also weighed in on the costs associated with getting a bank mortgage, which it said goes beyond the house price.
“At the time of submitting the application, lenders normally require an application fee which ranges from $100 to $200 depending on the institution involved,” said ZAHF adding that administration fees ranging from one percent to three percent are charged on successful applications and may be debited to the loan and be paid as part of the loan capital.
Transfer fees of approximately seven percent of the purchase price of the property will need to be catered for and are paid to the lawyers attending to the conveyance of the property from the seller to the buyer. The fee includes stamp duty paid to the Government.
“Bond registration fees of approximately four percent of the loan amount also need to be catered for. If there are other documents to be drawn up and executed along with the bond registration such as guarantees and suretyships, then the fee will increase. Similarly, the fee includes stamp duty paid to ZIMRA,” said ZAHF.
Mupfekeri said property buyers must be aware that there are other costs of buying property outside of instalments. He said the costs go beyond just the monthly instalments, but also include interests as well as insurance premiums.
“The other cost to consider is insurance. With a free-standing property, financial institutions need to make sure you have insurance to protect the asset, just like the insurance you are required to pay for when getting a bank loan.”
Currently, there are quite a number of insurance firms that are now into residential stands development, but when making sales they now include life insurance or life cover to make sure that the property is paid off when member dies.
Beware of unforeseen costs
When buyers moves into a new property, there are many other costs that they must be aware of that might have material impact on their financial well-being and this might include the initial cost of moving from an old address to the newly acquired house, which depends on the quantity of domestic items involved, distance to be travelled and the type of transport chosen.
“Costs relating to changing a dwelling to suit a new owner are mainly driven by personal taste. Normally the house needs curtaining as the previous occupants would have removed theirs. Then there may be need for redecoration and restorations. Houses that were previously occupied by tenants will generally need repainting or thorough cleaning of walls and floors and replacement of some items such as toilet seats, water tapes and light bulbs. There may also be need for more involved changes and alterations such as flooring.”
The house might have leaking roof and falling ceiling.
One also has to look at the property that they are buying and make sure they are comfortable with the security features that are in place.
“The last thing you want when you move into a property is to find that there is need to put things like burglar bars, fittings among others, but don’t have the funds to cover it,” said Mupfekeri.
Another thing to consider is whether the house in question is a pre-inhabited one or a brand new structure.
Brand new structures may not be entirely complete and cost of finishing the new structure to a comfortably habitable state may involve, painting and flooring. However, in addition to the costs related to a previously occupied house, cost of finishing the new structure to a comfortably habitable state may involve, painting and flooring.
These costs might leave serious financial implications if not considered.
In giving advice to potential home buyers or mortgage applicants ZAHF said borrowing money from a financial institution when buying property needs to be carefully thought and understood as this places long term commitments on the borrower and his/her family.
“Before approaching a financial institution for a mortgage clients must first have a relationship with a financier through a well maintained banking account, preferably one through which their salary is received or business transactions are conducted.
“They must also have a discussion with an official of the financial institution to understand how much one can be considered for on the basis of their income. For this discussion, the client must have proof of the income/s earned. It is also important to understand the institution’s terms and condition.
“Ask questions to fully understand all the issues involved such as the extra costs discussed above, how to handle the situation in financial difficulty, the consequences of default and any other issues of concern in order to make an informed decision.
“Most importantly bite what you can chew,” ZAHF said.
