for the government’s subsidy?
Potential homeowners earning less than R22 000 a month should not miss out on the golden opportunity to buy their first home while the interest rate is at its lowest over fifty years. South Africa is currently seeing the most favourable lending environment in decades but what may not be widely known is that many potential buyers, who would not ordinarily qualify for a bond, can qualify for a government subsidy.
Jenny Rushin, BetterBond National Development Manager says that 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.
Currently, first-time 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-time buyers. Many of these buyers were unsure of how to apply for FLISP or whether they even qualified.
“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” says new homeowner, Theo L.
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 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.
So, who qualifies?
“If your income is between R3 501 and R22 000 per month and you meet the requirements, you will qualify for this once-off subsidy,” says Rushin. The key criteria include having a financial dependent, be it a child or a spouse, and being a first-time homeowner. 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,” she explains.
It is 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?
The bond originator will apply to various 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, the bond originator can submit the FLISP application, along with the supporting documentation, directly to the National Housing Corporation on your behalf.
When the subsidy is approved, the money is paid directly towards the bond or to cover the deposit. No money is transferred to the applicant’s 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 an 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,” concludes Rushin.
Article courtesy of Lexis Digest