Advice and Opinion

Home owners may qualify for a housing subsidy under the FLISP grant

Many current home owners are unaware that first time home owners may qualify for a housing subsidy under the FLISP grant.

If they do not investigate and make use of the opportunity they may be losing thousands of rands by not claiming the FLISP subsidy, but also losing out on the opportunity to reduce their bond repayment and bond term and as such losing out thousands more says Verna Pugin who conducted an investigation into FLISP subsidies.

The word FLISP is an abbreviation for “Finance Linked Individual Subsidy Plan” the initiative by the Government to assist first time home owners to acquire their own homes and is available to all first time residential home buyers whose home loans have been approved, (as a pre-requisite) as well as current first time new home owners (who have already taken transfer). Current new home owners must apply for the assistance within 12 months from taking ownership if they live in the Western Cape and 3 months if they live in Gauteng and 24 months in the Free State or KZN.

The minimum FLISP subsidy is R20 000.00 and if such subsidy is paid into a bond R500 000.00 as a “once-off” payment, the home owners can save up to almost R100 000.00 and reduce their bond repayment from 20 years to almost 18 years, saving 2 years of bond repayments. Similar a subsidy of R40 000.00 awarded to a qualifying home owner with an income of R11 700.00 who may qualify for a home loan of R400 000.00, may save more than R170 000.00 on bond repayments, and reduce bond repayment terms from 20 years to 15 years and 6 month years, depending on the interest rate of the home owner.

The maximum purchase price of R350 000.00 was removed since the October 2104 and is now available to home buyers on condition that the gross combined household income is between R3510 – R15 000.00. The benefit to a bank will be that an additional payment into a bond account will also reduce the debt risk for a bank as it will reduce the loan to value ratio for loan, and we suggest that clients approach their banks to reconsider and reduce the interest rate that is applicable to a home loan once the FLISP subsidy is paid into their home loan, says Verna Pugin, who made an intensive study of government assistance over the past few years and she realised that home owners need to be assisted and informed about their rights to obtain FLISP subsidies. The research done by Verna led to hosting workshops with property developers, estate agents, home buyers and home owners as she realised the dire need amongst all stakeholders in the property market.

FLISP subsidies are available to pre-qualified property developments and to obtain such approval, property developers need to submit their application in advance to the Department of Human Settlements. The FLISP subsidy is however not limited to property developments only as this grant is available to the open market for all first time buyers as well. Any type of residential property can be bought, vacant land on which a house is to be constructed, a new house, or a property with an existing houses on it, as long as the applicant has pre-qualified for a home loan when he or she submits her application for the FLISP subsidy. Preference will also be given to applicants with dependents as the purpose of FLISP is to provide housing to home buyers with dependents. Applicants must also submit other supporting documents with their application.

Verna realised that home ownership education will play a vital role in creating sustainable home ownership and teamed up with Meyer de Waal, who developed the rent2buy concept as home ownership education forms a vital part of their educational module. With Rent2buy aspiring home owners will first rent the home they want to buy, as they do not meet the strict requirements of a bank to qualify for their home they want to buy, and during the rental period, they secure the property with the rent2buy agreement, then have the time and opportunity to improve their credit rating and affordability and save towards a deposit to enhance their chances the next time they apply for a home loan, some 12- 18 months later. Verna says such opportunities will allow the processing a FLISP subsidy application much faster as by the end of the rent2buy period, all the required FLISP documentation will be ready and available for processing.