Buying a house

tcofran

tcofran

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so i am going to buy my dad's house for between R350k and R400k. it is situated in a security estate / neighborhood, and is valued at R1.5million.

I read / heard somewhere that there is no transfer costs for bonds under R600k. is this true, and will the bank grant the loan if the house is worth so much more ?

Also, where can i get a standard "offer to purchase" as the only ones i get are like bank specific. ie. FNB etc, and i want to finance through standard bank.

TIA
 
Its not the value of the bond that counts but the value of the property, so you may still have to pay transfer duty if the value of the property exceeds R600K. They used to use the value obtained from 3 estate agents, not sure if its still used, or even if my assertions are correct.
 
and as soon as i post i find this, but thanks for the replies


http://homeloans-southafrica.co.za/homeloan-costs/index.htm

"Transferring the property from the current owner to you, involves three parties (SARS, the conveyance attorneys and the Deeds Office) and five costs: transfer duty, VAT, conveyance fees, Deeds Office registration fees, post and petty charges. You will be required to provide the money to cover these costs to your conveyance attorney who will in turn disburse the appropriate amounts to SARS, the Deeds Office and themselves.

1. Transfer duties: The amount of duties you have to pay SARS will depend on the purchase price of the property. If the property cost R 500,000 or less, it is exempt from transfer duties; if it cost between R 500,001 and R 1,000,000 the duty payable is 5% on the value above R500,000; and if above R 1,000,001 and more, the duties applied will be 8% on the value above R 1,000,001 plus and additional R 25,000.

2. Conveyance fees: The conveyance fees you stand to pay depend on who the conveyance attorney is and how much the property costs. The conveyance attorneys’ rates are generally between 0.7% and 1.2% of the price of the house.

3· Deeds Office fee: The fee levied by the Deeds Office to register the deed to the property in your name, depends on the value of the property, and starts at R 55 per registration.

4· Post and Petty charges: These are incidental expenses that are quite difficult to predict. You can budget for anything between R 250.00 and R 500.00.

5· VAT: 14% will apply to the conveyance fees and the post and petty charges."

and also

http://www.conveyancing24.co.za/index.php?option=com_content&view=article&id=344:download-offer-to-purchasedeed-of-sale-&catid=47:deed-of-sale-and-other-property-contracts-explained&Itemid=40
 
tcofran said:
so i am going to buy my dad's house for between R350k and R400k. it is situated in a security estate / neighborhood, and is valued at R1.5million.

I read / heard somewhere that there is no transfer costs for bonds under R600k. is this true, and will the bank grant the loan if the house is worth so much more ?

Also, where can i get a standard "offer to purchase" as the only ones i get are like bank specific. ie. FNB etc, and i want to finance through standard bank.

TIA
Click to expand...

Sadly, you'll be taxed on the current value of the property which will amount to roughly about R75000 on a R1.5M house.

As far as the bond goes, the bank will easily grant you a loan for such a low LTV (Loan to Value). I do suggest that you register a bond for the full value of the property though, and reserve the excess amount for "FUTURE USE", saving you from having to take out a second bond in the event that you want to increase your loan amount against the property. Also, I'd make sure that the fees and taxes are capitalised into the loan amount. With such a high value against such a low loan amount, you won't have a problem with that.

HOWEVER, I think you and your dad should go see a GOOD and TRUSTED financial adviser. I suspect it may be beneficial to set up a trust (in vivo) and transfer the house to the trust. You and your dad would then be the trustees and once in the trust, the property might be easier to manage from an ownership and tax perspective.

Juice
 
There is a fair chance that you might get away with it, but it is technically tax evasion -


How is transfer duty calculated?

Transfer duty is payable on the higher/highest of the following values regarding the "property" concerned:
(a)
the amount of the consideration payable (where consideration is payable);
(b)
the "declared value" (where no consideration is payable) (section 1 "declared value", section 14);
(c)
the "fair value" (section 1 "fair value") - which would be market value in most cases.

Where an unrealistically low or high price (i.e. consideration) is paid for property, section 5(6) is relevant. If the price is too high, the unrealistically high consideration will be the taxable value. If the price is too low, the onus is on the Commissioner to determine the fair value of the property. In terms of section 5(6), transfer duty "shall be calculated in accordance with the fair value [as determined] or the consideration payable or the declared value, whichever is the greater".
Click to expand...

http://www.law24.com/understand-your-legal-issue/law-for-the-layman/index.html?domid=/slucb/9kmdb/8seeb/a6mfb/sf1rb
 
Juice said:
Sadly, you'll be taxed on the current value of the property which will amount to roughly about R75000 on a R1.5M house.
Click to expand...
Could you explain this a little more? Who pays this tax? His father or himself?

If he buys the whole thing for R350k, and the bond is registered for R350k, will SARS come and slap a R75k tax on him at the financial year end?! Is it possible to get a bond for say R500k and then absorb all costs/tax into that?
 
What Juice said is sound advice...

The inter vivos trust is a good option
and transfer duty will definetly be payable on the FULL market value. You will have to sign a SARS declaration with your conveyancing docs as to valuation because of your related party status with the seller. Declare wrongfully and its is fraud and SARS can hit you with a penalty of double the tax due plus interest.

Also get a couple of decent written independant valuations and hold onto them for furure interrogation.

Also beware that SARS will likely deem the difference between actual value and settlement as a donation by your dad and levy donations tax on him.
 
markface said:
Could you explain this a little more? Who pays this tax? His father or himself?

If he buys the whole thing for R350k, and the bond is registered for R350k, will SARS come and slap a R75k tax on him at the financial year end?! Is it possible to get a bond for say R500k and then absorb all costs/tax into that?
Click to expand...

The tax will be calculated by the conveyancing attorney prior to transfer of the property and will be due ON transfer. It will be calculated based on the value of the property and not the loan/bond amount, as explained above in tcofran's post and will be payable by the BUYER.

Juice
 
markface said:
Could you explain this a little more? Who pays this tax? His father or himself?

If he buys the whole thing for R350k, and the bond is registered for R350k, will SARS come and slap a R75k tax on him at the financial year end?! Is it possible to get a bond for say R500k and then absorb all costs/tax into that?
Click to expand...

The R75000is transfer duty payable at tansaction date not year end. This is the tax levied on property purchaseand is settled via the conveyancer. It should be no problem getting the higher bank loan and funding the transaction costs outof that due to the LTV ratio, income dependant of course.

There are also ways that the father can defer the full settlement amount and write it off from his estate at death. There are options that need consideration and a competent legal opinion would be best.
 
Juice said:
I suspect it may be beneficial to set up a trust (in vivo) and transfer the house to the trust. You and your dad would then be the trustees and once in the trust, the property might be easier to manage from an ownership and tax perspective.
Click to expand...

Transferring to a trust will of course incur a straight 8% transfer duty levy = R120,000. And there are capital gains tax implications when you sell later on.

tcofran, are you married? I'm married, ANC with accrual and for me it made sense to buy in my wife's name. I stand surety for various facilities/businesses so I know our asset is protected from creditors. We also get the Primary Residence capital gains tax advantage and transfer duty was less than a trust.
 
etwylite said:
...
Also beware that SARS will likely deem the difference between actual value and settlement as a donation by your dad and levy donations tax on him.
Click to expand...

Beware of Uncle SARS - in '98 a friend bought a plot for 30% of its market value (just before the Pretoria property slump), she and the seller got audited. She said the deal of the lifetime was not worth the SARS pain even though it was legit deal.
 
Yus, all this **** just comes and bites you in the ass!!! I guess Uncle SARS is trying to single handedly run a welfare state...sigh.
 
markface said:
Yus, all this **** just comes and bites you in the ass!!! I guess Uncle SARS is trying to single handedly run a welfare state...sigh.
Click to expand...

I imagine this is a topic for the philosophical debate section, but in reality the pyramid is too big at the bottom and taxation is by far the easiest way to balance it out; however it is unfortunate that while SARS does an excellent job at collecting taxes, our beloved government does an even better job at squandering them. Sadly most of the money running down the side of the pyramid never make it to the bottom.

Juice
 
About the trust, is government and SARS not looking into changing how those work?
 
tcofran said:
and as soon as i post i find this, but thanks for the replies


http://homeloans-southafrica.co.za/homeloan-costs/index.htm

"Transferring the property from the current owner to you, involves three parties (SARS, the conveyance attorneys and the Deeds Office) and five costs: transfer duty, VAT, conveyance fees, Deeds Office registration fees, post and petty charges. You will be required to provide the money to cover these costs to your conveyance attorney who will in turn disburse the appropriate amounts to SARS, the Deeds Office and themselves.

1. Transfer duties: The amount of duties you have to pay SARS will depend on the purchase price of the property. If the property cost R 500,000 or less, it is exempt from transfer duties; if it cost between R 500,001 and R 1,000,000 the duty payable is 5% on the value above R500,000; and if above R 1,000,001 and more, the duties applied will be 8% on the value above R 1,000,001 plus and additional R 25,000.

2. Conveyance fees: The conveyance fees you stand to pay depend on who the conveyance attorney is and how much the property costs. The conveyance attorneys’ rates are generally between 0.7% and 1.2% of the price of the house.

3· Deeds Office fee: The fee levied by the Deeds Office to register the deed to the property in your name, depends on the value of the property, and starts at R 55 per registration.

4· Post and Petty charges: These are incidental expenses that are quite difficult to predict. You can budget for anything between R 250.00 and R 500.00.

5· VAT: 14% will apply to the conveyance fees and the post and petty charges."

and also

http://www.conveyancing24.co.za/ind...-other-property-contracts-explained&Itemid=40
Click to expand...

These are the old transfer fees. Check the SARS website for the new fees. It was slightly reduced.


Sent from my Desire HD using MyBroadband Android App
 
czc said:
About the trust, is government and SARS not looking into changing how those work?
Click to expand...
they are trying 2 change how the trust system works because ppl are using them as tax saving vehicles & they dont make use of independent trustees. So most of their transactions are very questionable. But if you have an independent trustee, the law changes wont affect you much.
 
I bought my house from my mum. SARS requested an external evaluation be done. Luckily the house was being renovated when they evaluated which dropped the value so I didnt have to pay more in transfer fees.
 
new transfer duty rates as at 23 Feb 2011:

property up to 600k = 0%
property 600k - 1 mil = 3% of value in excess of 600k
property 1 mil - 1.5 mil = 12k plus 5% of value in excess of 1 mil
1,5mil and above = 37k plus 8% of value in excess of 1.5mil
 
I currently live in a 2 bedroom flat with a flatmate in Centurion. I pay R2500 per month. I'm thinking of buying my own flat at the same complex I reside in at the moment and share it with someone, which means he/she will help me pay for my mortgage. I worry though about a few things, like what if in a few years from now roaches start roaming around? There aren't any that I've seen so it's all good, but I absolutely hate roaches. Don't you guys worry about something (beyond your control) that might creep up in a few years after buying a house?
 
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