Potential homeowners earning less than R22 000 a month need not miss out on the golden opportunity to buy their first home while the interest rate is at its lowest in over 50 years. It’s now common knowledge that South Africa is currently seeing the most favourable lending environment in decades. But what is not as widely known is that many potential buyers, who would ordinarily not qualify for a bond because of their monthly income, can qualify for a government subsidy that could make their dream of owning a home come true.
“Very few potential home buyers know that if they meet the criteria, they are guaranteed a once-off subsidy, known as a Finance Linked Individual Subsidy Programme (FLISP), ranging from R27 960 to R121 626, depending on their income,” says Jenny Rushin, BetterBond National Development Manager.
Already, first-home buyers are taking advantage of the low interest rate, as well as the raising of the transfer duty threshold to R1 million, with BetterBond reporting that 70% of its bond applications for the past three months have been first-home buyers. Many of these buyers were unsure of how to apply for FLISP, or whether they even qualified.
Says new homeowner, Theo L: “When I first heard about the subsidy, I couldn’t believe it was real. We had put money aside for the transfer fees and, with the approval of the subsidy, we could instead save that money and put it towards other expenses for the house. It was a great surprise.” Rushin says FLISP can be used as a deposit to reduce the purchase price of the home, or added to an approved home loan to allow for the purchase of a more expensive property.
For example, an applicant earning R15 000 a month would qualify for a FLISP subsidy of R61 300. Based on this income, the applicant could qualify for a bond of around R580 000, at the prime lending rate of 7%. With the FLISP subsidy, the buyer would pay only R518 700 for the same property. This saving could be used to pay in an additional amount on the bond, thereby reducing the bond repayment period.
If you have an income of between R3 501 and R22 000 a month, and you meet the requirements, you will qualify for this once-off subsidy, says Rushin. The key criteria include having a financial dependant, be it a child or a spouse, and being a first-time home owner. The applicant must also be a South African citizen.
“This subsidy is ideal for home buyers who have historically struggled to secure a home loan because their income was too low for bond finance, but too high to qualify for government housing schemes. FLISP bridges the gap between these two finance options,” explains Rushin.
It’s important to remember that your bond needs to be approved before you can apply for FLISP. “The good news is that the money is there, and if all the requirements are met, FLISP will be paid. Everyone who qualifies will get it,” adds Rushin
Why use a bond originator for a government subsidy?
BetterBond will apply to several banks on the applicant’s behalf to secure the most favourable interest rate for the home loan. Once the application has been approved in principle by one of the banks, BetterBond can submit the FLISP application, along with the supporting documentation, directly to the National Housing Finance Corporation on their behalf.
When the subsidy is approved, the money is paid directly towards the bond or to cover the deposit. No money is transferred into the applicant’s personal bank account. Says Rushin: “With the additional funding, it’s possible to qualify for a home valued at more than a FLISP applicant would otherwise have been able to afford. Although, it is still advisable to purchase a property that is still well within their means.”
What can you buy with FLISP?
When using FLISP to buy or build residential property, a client can choose between development housing projects or the open market. This means that they can buy an old or new existing residential property, a piece of vacant land that is linked to a home builder registered with the National Home Builders’ Registration Council (NHBRC) or they can build on a serviced residential stand that they own themselves, and that is linked to a NHBRC home builder.
“This once-off subsidy will go a long way to ensuring that even more first-home buyers make the most of the current lending environment,” says Rushin.
*Article sourced from Property 24*
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