Real Estate Investor Magazine South Africa December/ January 2018/2019 | Page 28

FINANCE
Game Changer for First
time Home Buyers
Finance available broadens
BY MEYER DE WAAL
G
ame changer for first time home buyers: If you earn
between R3501 and R22 000 per month you can now
possibly qualify for a government subsidy through
FLISP.
As from 28th July 2018, first time home buyers that earn up
to R22 000 per month can now benefit from the new FLISP
(Finance Linked Individual Subsidy Programme)  subsidy
increase.
The FLISP subsidy is a subsidy linked to a financial
“package”, which is why pre-approval of a home loan is an
integral part of the FLISP application.
“The previous income “ceiling” for a FLISP subsidy was
R15 000 and now increased to R22 000.
This will be a game changer, as property prices escalated so
much in the past few years that the old maximum subsidy of
R20 000 [if one earned R15 000 per month] contributed little
to the relief of a home buyer. 
A home buyer who earns R12  000 can now qualify for a
subsidy of R77 915 compared to the old subsidy of R37 650.00.
Now that the Flisp subsidies are available for a total gross
household income up to R22 000 per month, it means that the
purchase price of a home of up to R680 000 on a prime lending
rate [currently 10 %] and R640 000 on an interest rate of the
current prime lending rate of 10 % plus 1 % can be achieved,
compared to +/- R450 000 under the old subsidy system says
Verna Pugin of CM2 Group who heads the FLISP service as
a private service to home buyers.
First time buyers who earn a household/single income of
R15 000pm will now receive a subsidy of R62 304 compared
to the previous subsidy benefit of R20 000 in the same income
bracket.
Income of R22 000 per month will qualify for a subsidy of
R27 960.
FLISP criteria
Flisp subsidies are available for first time home buyers who
earn between R3 501 – R22 000 per month.
The home loan of the buyer must first be approved and the
buyer must be a South African citizen and be married, co-
habiting or single with a dependent.
The new buyer must never have benefitted from a similar
subsidy before; e.g. an RDP house.
Home buyers who recently took transfer and meet the
qualifying criteria can also apply. The new R22  000 income
26
DECEMBER 2018/JANUARY 2019 SA Real Estate Investor Magazine
subsidy bands however will only be applicable for properties
that are in process of application or transferred after 28th July
2018.
Using the Flisp subsidy as a deposit
Only 40 % of home loans are approved as a 100% home loan.
From recent statistics published by ooba, the average
deposit required for first time home buyers is 12,3% calculated
on the purchase price. On a purchase price of R600  000 a
12,3% deposit is R73 800. 
A Flisp subsidy can be used as a home loan deposit, or if a
100% home loan is obtained, paid back into the home loan to
reduce the home loan term or monthly repayment.
Negotiate a better home loan interest rate
If a 100% home loan is granted, to mitigate the lending risk,
usually a financial institution will add one or two percentage
points to the home loan rate, example prime plus 2% extra. 
Pay more
According to calculations done by Pugin, with the prime
lending rate being 10 % at the moment, the buyer can end up
paying 12% interest on the home loan if additional interest
rate is added. This extra 2 % will cost the buyer 24.8 % more
in home loan instalments if the loan is repaid over 20 years. 
As example:
• R600 000 paid back over 20 years at a rate of 12% will be
R 985 564 interest paid
• R600 000 paid back over 20 years at a rate of 10 % will be
R789 631 interest paid
The result is that 2 % extra interest will cost a home owner
R 195 933 more for the property bought.
Less home loan for your income
This extra 2 % will also reduce the home loan amount for the
home buyer. As example, on an income of R22 000 per month:
• an interest rate of 12 % can result in a home loan of R
599 408 and 
• an interest rate of 10 % can produce a home loan of
R683 922.
The result is that 2 % extra interest will lower the home loan
of the home buyer by R84 514.
If a deposit is offered to a financial institution, this deposit
will reduce the risk of lending of the bank and in “bank speak”,