Costs to Consider When Budgeting For a Property – Part 2
Many people dream about being a homeowner, or even moving into a bigger property, but it is important to stay realistic of your financial capabilities when budgeting for this change in lifestyle. In last week’s article, we looked at all the once-off costs you need to factor in when buying a home. In this week’s article, we will unpack the ongoing costs you need to budget for when being a homeowner.
Bond repayments
Bond repayments are typically the largest ongoing expense for property owners. The monthly repayment depends on several factors, including the loan amount, the prevailing interest rate, and the repayment period. In South Africa, the interest rate is usually linked to the prime lending rate, which can fluctuate. For instance, a bond of R1 million over 20 years at an interest rate of 11% would require a monthly repayment of around R10,322. It is advisable to use a bond calculator to estimate your repayments based on different interest rates and loan terms to get a better idea of what you will be able to afford.Monthly bond administration fee
In addition to your monthly bond repayments, you will also be charged a small monthly administration fee for managing your bond. This fee is usually under R100.Homeowner’s Insurance
Homeowner’s insurance is essential for covering the structure of your home against risks such as fire, storms, and other potential damages. This insurance is typically mandatory if you have a bond. The premium varies depending on the property’s value, location, and the insurer, but it usually ranges between R200 and R800 per month for a standard home. It is important to review your policy regularly to ensure that you have adequate coverage for your property.Life insurance (if required)
Some banks require you to take out life insurance to cover the outstanding bond amount in the event of your death. This ensures that the bond is paid off, protecting your family from financial burden. Premiums for life insurance depend on factors such as your age, health, and the insured amount, but they typically range from R150 to R600 per month. It is wise to compare policies from different providers to find the best coverage at a reasonable cost.Municipal rates and taxes
Property owners are required to pay monthly municipal rates and taxes, which fund local services such as waste removal, street lighting, and sewage. These rates are calculated based on the property’s municipal valuation. For a property valued at R1.5 million, you can expect to pay between R1,200 and R3,000 per month, depending on the municipality. Rates can vary significantly between different municipalities, so it is important to check with your local council for specific rates.
Utilities
Monthly utility costs include water, electricity, and sometimes gas, depending on your location and consumption. These costs are typically billed by the municipality or service provider. For an average household, utilities can range from R1,000 to R3,500 per month. Implementing energy-saving measures, such as using LED lighting and water-efficient appliances, can help reduce your monthly utility bills and improve the sustainability of your home.Levy payments (if applicable)
If you own a sectional title property, such as an apartment or townhouse, you will need to pay monthly levies to the body corporate. These levies cover the maintenance of common areas, security, and other shared amenities. The cost of levies can range from R500 to R5,000 per month, depending on the size of the property and the amenities provided. In a complex with basic amenities, you might expect to pay around R1,200 to R2,500 per month.Maintenance and repairs
Regular maintenance and repairs are essential to keeping your property in good condition. This includes tasks like repainting, roof repairs, plumbing, and electrical work. It is recommended to budget about 1% to 2% of the property’s value annually for maintenance costs. For a R1.5 million home, this could mean setting aside R1,250 to R2,500 per month. Performing regular inspections and maintenance can prevent more costly repairs in the future and help maintain the value of your property.Security costs
Unfortunately living in South Africa means security needs to be a top priority. This might involve installing an alarm system, subscribing to armed response services, or contributing to a neighbourhood security initiative. Basic armed response services typically cost between R300 and R600 per month, while more comprehensive security packages, including monitoring and maintenance, can go up to R1,500 per month. In secure estates, additional security levies might be included in your Home Owner Association (HOA) fees.