So you have decided to take the big step of buying your first home, congratulations! First things first, you search around for properties on sale, within a price range you think you can afford to pay off every month. You then find your dream house, put in an offer, and the rest as they say is history. Your name is on the legal documents and its official. It’s a good day!

Besides the bond costs which are determined by a few factors, namely the deposit you have managed to put down, the bond rate you were approved for by your bank and what interest you will be paying the bank each month; but after all that expense, the monthly costs also include rates and taxes or levies.

Rates and taxes

The municipal rate charge covers all services provided to you by your local municipality. These services include sewerage, street light and roads maintenance as well as the collection of refuse.

Calculations on property rates are valued according to the land as well as any buildings or improvements made. This value is determined by the market value of your property – essentially, the price you would get for the property within the open market (between the buyer and the seller).

With this value as your base, you will be able to work out a comparative value of the properties in your neighbourhood. This overall municipal value is what determines how much you will pay in terms of levying of property rates.

The amount you pay in rates is determined by the different category of properties. At this stage, this is only set out for urban dwellers, with many rural properties exempt from paying. Rates may vary according to different freestanding property types such as residential, industrial, commercial, agricultural or business.

Living in Johannesburg? Here’s how to calculate your rates:

Get a valuation from eServices http://eservices.joburg.org.za/joburg/eservices/ or pop on over to the Valuations service centre (4th Floor, A block, Metropolitan Centre, 158 Loveday Street, Braamfontein)

• A property with a value of less than R200,000 don’t pay rates. (However, a R5 p/m fee is charged for municipal public services).

• Sectional title home owners will automatically qualify for a 20 per cent rebate over and above this threshold.

Levies

For sectional title homeowners (those owning townhouses, complexes or flats), you will be charged a levy instead, which covers all complex maintenance costs, limited building insurance cover, and general repairs.

A body corporate is put in place within a sectional title scheme to establish an administrative fund, which will be used to cover the abovementioned expenses.

The expenses of a body corporate in more detail include: the repair, control, management upkeep as well as administration of all common property; payment of taxes; as well as water and lights, and sanitary costs.

How are levies raised?

The expected expenditure within the next financial year is discussed and determined by outgoing trustees, which is then considered at an AGM (Annual General Meeting). Once all the owners within the sectional title scheme approve said expenditure, it is then determined how much each individual home owner will then have to pay as per their levy rate. Trustees inform all homeowners of this amount and it then becomes the responsibility of each home owner to pay this amount, usually in monthly instalments.

Special levies

On occasion, the trustees may request that all home owners contribute in raising a special levy to cover additional expenses, not initially covered in the budget. These special levies are then payable as a lump sum or in installments as per the trustees arrangement.

Final word: when buying a house of your own, remember these additional expenses coming your way, be it in the form of rates and taxes or levies. Both have their pro’s and con’s, but it’s you that has to make the decision as to what is best for you and your pocket.