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The monthly costs of owning a home
Your bond instalment is not the whole bill. Once you own a home you also pay rates, utilities, insurance and upkeep, and if you buy in a complex you pay levies too. A good rule is to budget for the instalment and then add every other cost on this list before you decide what you can afford.
The bond instalment
This is the biggest cost for most owners. It depends on the amount you borrow, the interest rate and the term. The rate on a variable bond can change, which changes your instalment, so test your budget at a higher rate than today’s. See fixed or variable interest rate.
Most banks also take a monthly service fee on the account. Ask what yours is.
Rates and taxes
Municipal rates are a monthly charge for the services the municipality provides. They are calculated on your property’s market value as shown on the municipality’s valuation roll, multiplied by the council’s tariff. Part of a home’s value is excluded. The national minimum exclusion is R15 000, and some cities exclude more.
If you think the valuation of your home is wrong, you can inspect the roll and object during the period set out in the municipality’s notice. The objection must be about a specific property, and you must keep paying rates while it is considered.
Levies in a complex
If you own a sectional title unit, you pay a monthly levy to the body corporate. The body corporate is the association of owners in the building. It must keep an administrative fund for running costs and a reserve fund for big repairs. A trustee-run scheme sets the levies in a budget each year, and they can go up.
In an estate or complex with a homeowners’ association (HOA), you usually pay a levy to the association. Ask what the levy covers and look at the latest financial statements. See buying sectional title: what to check and buying in a security estate.
Utilities and running costs
- Electricity and water. These depend on your household and your area. Ask the seller for recent bills.
- Refuse and sewerage. These are often charged by the municipality, sometimes inside the rates account.
- Internet, TV and security. Monthly security or alarm monitoring can be a significant cost.
- Garden and pool. If you hire help or pay for chemicals and equipment, add that.
- Backup power. Inverters, batteries and solar can reduce running costs but cost money to install and maintain. See solar and backup power when buying.
Insurance
Banks normally require you to insure the building while the bond is registered. You will probably also want to insure your belongings. Many people also take a policy that pays off the bond if they die or become disabled. See insurance explained.
Maintenance and repairs
Roofs, geysers, plumbing, paint and electrical faults come with owning a home. Nobody can predict exactly when, so set aside a fixed amount every month in a separate account. Older homes usually need more than newer ones. If you buy sectional title, the body corporate pays for the common property, but you still pay for repairs inside your unit.
Working out your total
Add the lines together. Here is a simple, made-up example. If the instalment is R12 000, rates R1 200, utilities R2 500, insurance R900, and you set aside R1 000 for repairs, your total is R17 600 a month. That is not a quote. It shows how much more the total can be than the instalment alone.
Compare that total with your take-home pay. Banks use their own rules, but you should also work out what feels comfortable, with room for a rate rise and a bad month. See how banks assess home loan affordability.
What to do next
- Ask the seller or agent for recent rates, levy and utility statements for any home you like.
- Add them to a monthly budget with a line for insurance and repairs.
- Test the budget with a higher bond rate.
The affordability calculator shows what you might be able to borrow, and the bond repayment calculator gives your instalment. You can compare owning with renting using the rent vs buy calculator.
This article is general information for South African readers, not legal, financial or tax advice. Rules and rates change, so check your own situation with an attorney, your bank or a tax practitioner. Our property calculators can help you work out the numbers.