Does a Bond Cover Transfer Costs? Everything You Need to Know

When it comes to purchasing a home, there are several costs involved that go beyond the asking price. One of these costs is the transfer costs, which can add a significant amount to your overall expenses. But what exactly are transfer costs and can a bond cover them? In this article, we will explore the difference between transfer costs, transfer duty, and bond costs, and answer the question of whether a bond can cover transfer costs.

Understanding Transfer Costs

Transfer costs refer to the expenses associated with transferring the ownership of a property from the seller to the buyer. These costs are typically paid by the buyer and include various fees and taxes. They are calculated based on the purchase price of the property and can range between 8% and 10% of the total purchase price.

Transfer costs include several components, such as transfer duty, conveyancing fees, and bond registration fees. Let's take a closer look at each of these components:

Transfer Duty

Transfer duty is a tax imposed by the government on the transfer of property. It is calculated based on a sliding scale, with higher rates applied to more expensive properties. Transfer duty is typically paid by the buyer and can be a significant expense.

Conveyancing Fees

Conveyancing fees are the fees charged by the conveyancer or attorney who handles the legal aspects of the property transfer. These fees cover services such as preparing and reviewing the necessary documentation, conducting property searches, and facilitating the transfer process.

Bond Registration Fees

If you are financing your property purchase with a bond, you will need to register the bond with the Deeds Office. This process incurs additional fees, known as bond registration fees. These fees cover the administrative costs associated with registering the bond and ensuring that it is legally valid.

Can a Bond Cover Transfer Costs?

Now that we have a better understanding of transfer costs, let's address the main question: can a bond cover transfer costs? The answer is yes, but only to a certain extent.

When you apply for a bond to finance your property purchase, you can include the transfer costs in the bond amount. This means that the bond will cover the transfer costs, but you will ultimately be paying for them through your bond repayments. It's important to note that including transfer costs in your bond will increase your monthly repayments and the overall cost of the property in the long run.

It's also worth mentioning that not all lenders allow the inclusion of transfer costs in the bond amount. Some lenders may have specific criteria or restrictions in place regarding what can be included in the bond. It's always best to consult with your lender or a mortgage advisor to determine if you can include transfer costs in your bond.

Other Considerations

While a bond can cover transfer costs, there are a few other factors to keep in mind:

• Interest Rates: Including transfer costs in your bond will increase the total amount borrowed, which means you will be paying more interest over the life of the bond.
• Affordability: Adding transfer costs to your bond will increase your monthly repayments, so it's important to consider whether you can comfortably afford the higher repayments.
• Repayment Period: Including transfer costs in your bond may extend the repayment period, resulting in a longer time to repay the loan.

Conclusion

In summary, transfer costs are an important aspect of purchasing a property and can add a significant amount to your overall expenses. While a bond can cover transfer costs by including them in the bond amount, it's important to consider the long-term implications, such as higher monthly repayments and increased interest costs. Before deciding to include transfer costs in your bond, it's advisable to consult with your lender or a mortgage advisor to ensure that it aligns with your financial goals and affordability.