three different housing options
- renting
- building
- buying
factors to consider before renting, building or buying
- lifestyle
- size of family
- stage in life cycle
- financial circumstances
- location of property
person who rents a house or flat
lessee or tenant
owner who lets out property
lessor or landlord
rent
a fixed amount of money paid every month by the tenant to the landlord in exchange for the right to live on the property
lease
an agreement reached between owner and tenant
where must a newly built house be registered?
NHBRC
NHBRC
National Home Builders Registration Council
ensures proper building standards and responsible behaviour by contractors involved
two types of housing
- full title property
2. sectional title property
full title property
buyer of property becomes legal owner of the full property (full = plot and structures on it)
sectional title property
buyer of property becomes legal owner of a section in a housing complex, communal areas are owned jointly
advantages of renting
- more affordable in shot term
- tenants don’t pay insurance or rates on property
- tenants are not responsible for maintenance
disadvantages of renting
- lease renewal is not guaranteed
- tenants are not allowed to make structural changes
- owner must approve any changes tenants want to make
advantages of building a house
- house can be designed to owners needs and taste
- fittings and appliances are new
- new houses are often built in developing areas
disadvantages of building a house
- could cost more than buying
- delayed construction in an inconvenience
- property rates and service charges must be paid to local authorities
advantages of buying a full title property
- buyer becomes legal owner of entire property
- property can be sold for a profit
- it’s quieter and more private than sectional title
disadvantages of full title property
- mortgage payments are more expensive than rent
- owner is responsible for maintenance and payment of property rates and service charges
- if property is sold, capital gains tax must be paid on profit
advantages of sectional title property
- it is safer than than a full title property with better security
- you can use communal facilities
- maintenance costs are less than full title property
disadvantages of sectional title property
- owner must comply with decisions of body corporate
- less privacy
- owner must pay monthly levy to cover property rates and services, insurance and maintenance
a deposit
- paid by the tenant before the property is occupied
- usually equals one month’s rent
- protects the owner should the tenant fail to pay rents or cause damage to the property
costs so consider when building a house
- plot: purchase price, transfer duties
- labour: architect and builder(s)
- materials: everything needed
- municipal fees: building plan must be submitted for approval, fee is charged
a mortgage or home loan
money borrowed from the bank to buy a property, paid off over an agreed period in monthly installments with interest to the bank
financial responsibilities of home owners (3)
- accounts for water, electricity, refuse removal, sewerage
- maintenance
- mortgage payments
general content of a lease (5)
- name, signature, address of tenant and landlord
- date of signing and occupation
- rent that must be paid
- notice period to terminate lease
- rules about maintenance and behaviour
a building contract
written agreement between landowner and builder, listing:
- terms and conditions,
- where building will take place
- specific price
- agreed specifications
offer to purchase
written offer to owner of property
deed of sale
offer to purchase after seller accepts and signs it
comprehensive homeowners insurance
short-term insurance that protects house against structural damage from fire, floods, natural disease
household insurance
covers contents of a house against fire and theft
interest
amount of money bank charges to to lend the loan amount to the buyer
repo rate
interest rate determined by Reserve Bank
transfer costs
legal fees paid when property is purchased and and rigthts are transferred from seller to buyer
transfer duties
state taxes payable when ownership of property is transferred to buyer
paid when:
a) property value is R600 00 or less
b) new property is bought from developer
conveyancer
property lawyer
attorney fees
payment made to conveyancer for overseeing transfer process
deeds office fees
paid to deeds office for registration of mortgage loan and title deeds
mortgage registration fee
paid to conveyancer to register mortgage in name of the buyer
interim interests
interest payable on the mortgage before it has been registered
bank initiation fee
once-off bank charge for processing mortgage application
property valuation fee
paid to bank fro valuation of property
property tax
based on market value of property used to fund municipal services
occupational rent
paid to seller if buyer occupies property before mortgage has been registered
administration fees
monthly fee on loans for residential property paid to bank
utility connection deposit
deposit paid to municipality for connecting services such as water and electricity
bank requirements for granting a home loan (5)
- application for home loan
- certified copy of offer to purchase
- ID or passport
- proof of steady income
- copy of bank statements
housing subsidy
once-off grant paid to lower income group buyer who is buying residential property for the first time
paid to bank by government
requirements for government subsidy (5)
- SA citizen
- +18 years old
- total household income should be less than R3500
- no one in household may have received one before
- applicant may not have owned a house previously
individual subsidy
- lower income household buying house for first time
- can only be used once
- 2 types:
1) non-credit-linked subsidy
2) credit-linked subsidy
non-credit-linked subsidy
buyer uses own savings + subsidy to buy house
credit-linked subsidy
buyer does not have enough savings and has to take out a loan to add to subsidy to buy a house
consolidation subsidy
supplementary subsidy for people for people who have already received a subsidy and are living on a serviced site and want to build a house
institutional subsidy
paid to non-profit organisations offering rental accommodation to people from lower income groups
enhanced people’s housing process (EPHP)
available to organised groups, communities and households wanting to build their own houses
rural subsidy
given to people who do not have formal tenure rights to the land where they live, it is available on a project-only basis
project-linked subsidy
can be used to buy a house and the plot on which it stands in an approved municipal housing project, paid directly to the municipality
discount benefit scheme
encourages tenants of state-financed rental housing to buy their own house
relocation assistance
offers assistance to homeowners who can’t pay their home loans
they are helped to buy a more affordable house
government employee housing subsidy
granted to employees in government service who work for the gov full time, make a contribution to a pension fund and occupy the house (don’t rent it out)
3 ways that employers can offer assistance to employees
- arrange home loans and housing subsidies
- purchase all building materials
- provide accommodation to employees at lower rent