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Help for those in the gap property market

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People with qualifying incomes can use a Flisp subsidy to reduce their home loan or increase their purchasing power

The government-introduced Finance Linked Individual Subsidy Programme (Flisp) assists first-time buyers in the so-called “gap” market to buy their own homes.

This market is made up of those who earn too much to qualify for a free government home but too little to buy without some form of financial help. This subsidy is open to those with a combined gross household income of R3 501 to R22 000 and who meet the qualifying criteria, says Meyer de Waal, director of MDW Inc Attorneys, one of the founding members of the Attorney Realtor Hub and Flisp assistance services.

The subsidy ranges from R27 960 to R121 626 and is calculated on a sliding scale according to the recipient’s income.

To qualify the buyers must:

  • Have a home loan already approved.
  • Be a South African citizen over the age of 18.
  • Be married, co-habiting or single with a dependent.
  • Never have benefited from a similar subsidy before, such as an RDP house.

How can the Flisp subsidy be used?

It can be used to pay a home loan deposit or to decrease the size of a home loan. DeWaal says in the Western Cape, the subsidy can also be used to cover the transfer or bond registration costs. If the Flisp subsidy is used as a deposit, a smaller home loan can be applied for. For example, a R50 000 subsidy on a R600 000 home means the home loan amount need only be R550 000.

“It is easier to qualify for a home loan of R550 000 than one of R600 000 and your monthly repayments will also be lower.” The subsidy can be used to increase the home buyer’s purchasing power. For example a R50 000 Flisp subsidy added to a R600 000 home loan allows the buyer to purchase a home for R650 000.

“The subsidy can help a first-time buyer shop around for a home they previously could not afford as their home loan approval was too low,” De Waal says. 

Where do I start?

Many first-time home buyers will first find a property and sign all the legal documents to secure the property before finding out if they qualify for a home loan and a Flisp subsidy. But De Waal says qualifying for a subsidy should be the first step for any home buyer.

“Most home buyers first find a property and then the worry starts about much they will qualify for. We first look to assist a home buyer to establish his or her actual purchasing power and only then seek a property that matches their budget.”

De Waal says when you want to buy a home with with a Flisp subsidy:

◆ Establish if you qualify for the Flisp subsidy Establish the home loan amount you will qualify for – check your credit score as a low or bad score can prevent you from qualifying for a home loan. Without an approved home loan you cannot get access to a Flisp subsidy.

◆ Check what you can afford by comparing your income, debt repayments and living expenses to make sure you have at least 30% of your income available to repay the monthly home loan instalments.

◆ Get your home loan prequalification estimate and add that to your Flisp subsidy amount. This will be your home buyer power. Do not forget to budget in the transfer and bond registration costs you have to pay if the purchase price does not include these.

◆ Start your property search according your budget. When you find a property that you can afford, sign an offer to purchase, using your pre-approval certificate and Flisp subsidy as a guide.

◆ Apply for the Flisp subsidy: As soon as the home loan is approved you can submit your Flisp application. You can apply directly to the Department of Human Settlements in the Western Cape and the Free State as well as to the National Housing Finance Corporation if you live in Gauteng or KwaZulu-Natal. One can apply directly or through accredited service providers.

◆ Submit the offer to purchase to the Flisp office for submission to the banks for a final bond approval.

◆ The government will issue a guarantee to the transferring attorneys, once the Flisp subsidy is approved, or it can be paid directly in the home loan account. De Waal adds: “An online home loan Flisp affordability calculator is available on the Flisp website at www.flisp.co.za. “Buyers should also check their financial health and what bond they qualify for at https://FLISP.mybondfitness.co.za. 

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