Home Loan Transfer Duties

What are transfer duties? Well, basically it is a tax which is payable on property transactions. The government benefits quite nicely for this and for us as homeowners we have to take this tax into consideration when looking for that ideal property.

The transfer duty is quite a high additional cost that is often overlooked and can affect the purchase of a property, especially first time buyers.

Trevor Manuel - Minister of Finance is aware of this and has addressed this issue. In previous years he has abolished transfer duties on properties below certain values, mainly below R150 000.

This year was the most surprising when he made property below the value of R500 000 transfer duty free. This has had a considerable impact on the sale of property due to the fact that buyers put purchases on hold until after the 1st of March.

Elske Wesemann of Key Network Alliance states that the transfer duty relief had a considerable impact on the market in early 2006. The amounts that could be saved after the increased transfer duty threshold could make or break a sale.

2006 transfer duties:

Up to R500 000 = R0
R500 000 to R1 000 000 = 5%
R1 000 000 plus = 8%

For a R500 000 home loan that is financed over 20 years, at the prime overdraft rate, the monthly repayment decreased from R5226.00 in 2003 to R4992.00 in 2006. This would result in a monthly saving of R234 or R56 069 over the 20 year period.

Keep in mind that the transfer duty relief does not mean your purchase is now free of costs. There are additional fees such as conveyancing fees, bond registration costs etc that can add up to a few thousand Rand.

The reduction of transfer duty costs has had a large impact on home values and rental returns. There is speculation as to what is next from the Minister but we will just have to wait and see!

Related Insurance Articles:
* Why Home Loans Are a Good Debt
* Do Your Homework Before Buying a Home
* Using a Home Loan Originator
* Home Loans Basics
* Home Loan Options
* Should You Keep Your Bond Open
* Home Loan Interest Rates
* How To Use Your Bond As A Financial Resource

3/7/2008 4:04:35 PM