FLISP – the home loan subsidy we never knew we had

    Wednesday, July 28, 2021, 10:39
    Author name
    Anna Gouws
    new home

    This article is specially aimed at first-time home buyers and the conveyancers who render the services. (But first, conveyancers, to read how you can escape the endless paperwork, scroll down to “Now, attorneys, did you know that FLISP Assist can help you with the application?”)

    Do you plan to buy your first home anytime soon?

    home

    Yes? Good on you! Why don’t you start searching for the right home the right way? Property24 is your friend. Additionally, you can also scroll down to “So, where do I start?” for an upside-down but smart way to buy a home.

    No? Why not? Is it because your income is too low? Did you know that you may qualify for the FLISP home loan subsidy if your combined total household income is up to R22,000? Depending on your income, a subsidy of between R27,960 and R121,626 might be coming your way. 

    So, what exactly is a FLISP subsidy?

    • FLISP stands for Finance Linked Individual Subsidy Program and is made available by the government.
    • These subsidies are processed by the Department of Human Settlements or the National Housing Finance Corporation.
    • They are available for those within the ‘gap housing market’, namely for households with a total income of between R3,501 to R22,000 per month.
    • Furthermore, the amount you will receive is calculated on a sliding scale according to your income. Click here to view the FLISP sliding scale.

    Or are you not too keen on reading and would rather watch a video? Check out this interview. 

    What can I use the FLISP subsidy for?

    To:

    • buy any residential property, new or old; or
    • buy a vacant serviced residential stand or plot linked to house-building contracts; or
    • build* a residential property on a serviced residential stand that you already own; or, lastly,
    • build* on a tribal stand available through permission to occupy (PTO).

    *Builders must be registered with the National Home Builders Registration Council (NHBRC).

    Is the FLISP subsidy paid into my bank account?

    No, it is paid either into your home loan or to the attorneys. Here’s how it works: Firstly, it can be used to reduce the home loan amount you owe the bank (example 1) or, secondly, to fill the gap between the loan you qualify for and the price of the home you want to buy (example 2).

    Example 1: FLISP acts as a deposit and reduces the amount you owe the bank

    Property price: R300,000

    Approved home loan from the bank: R300,000

    Use FLISP subsidy as a deposit: R90,000*

    EVENTUAL HOME LOAN AMOUNT: R210,000

    In this example, the home loan subsidy is paid as a deposit on the initial home loan amount. As a result, the monthly instalments on your loan are lower. In this case, the FLISP subsidy is paid directly into your home loan account.

    Example 2: FLISP fills the gap between the loan you qualify for and the price of your home

    meeting

    Approved home loan from the bank: R210,000

    Use the home loan subsidy to fill the gap: R90,000*

    Property price: R300,000 achieved with the combination of the home loan and FLISP subsidy.

    In this example, the FLISP subsidy augments the shortfall (or fills the gap) between the loan amount you qualify for and the total property price. Therefore, the subsidy is paid into your transfer attorney’s trust account, who subsequently transfers it to the bank.

    In some provinces, you can use the subsidy to pay transfer and bond attorneys’ fees as well. You can ask your attorneys for more information.

    *The R90,000 FLISP subsidy amount is an example and the amount will differ according to your income.

    How do I know if I qualify for FLISP?

    If you can answer yes to all the questions below you are likely to qualify for FLISP. Indeed, you will do well to ask a conveyancing attorney to help you with the home subsidy application.

    • Are you a South African citizen with a valid ID or a permanent resident with a valid permit?
    • Is your joint gross household income between R3,501 and R22,000 per month?
    • Will this be the first time you purchase a home or residential stand?
    • Have you never benefited from a government housing subsidy scheme before (for example, RDP housing)?
    • Are you married or cohabiting, or are you single with a dependant?
    • Do you have an approved home loan from an accredited South African financial institution?
    • Are you older than 18 years and competent to legally contract?

    So, where do I start?

    Most home buyers first go on a scouting trip to find a property they like and only later start worrying about the legal and financial requirements. However, the process should work the other way around. First, find out what you buying power is, in other words, what you can afford, and then find a property that matches your budget.

    Here’s how:

    Step 1:

    Firstly, find out whether you qualify for a subsidy and for what amount. You can do this on the FLISP Assist website even if you don’t have an approved home loan yet. 

    Consequently, you will receive your Subsidy Voucher from the FLISP Assistance Service. As a result, you will know what amount you have available as a deposit. 

    Step 2:

    Secondly, find out what home loan amount you qualify for and check your credit score to see if you are fit for a home loan. A bond indicator like My Bond Fitness can help you to perform both these checks for free. They will then issue you a pre-approval certificate.

    You can also watch the video on how My Bond Fitness works.

    So, now that you know your credit score, the FLISP subsidy amount and the home loan you qualify for, you know what your buying power is.

    Step 3:

    Thirdly, once you have the pre-approval for a bond (in other words, a home loan), find the house of your dreams that fits into your budget, and sign an offer to purchase, using your pre-approval certificate.

    Step 4:

    Fourthly, go back to My Bond Fitness (or the home loan service of your choice) and let them negotiate and apply for the best possible home loan on your behalf. Remember to mention that you are applying for a FLISP subsidy as well. 

    Step 5:

    Lastly, the attorneys take the process further. Either the estate agent that assisted you with the purchase will bring you in contact with the transfer attorneys, or you can appoint attorneys of your choice. Ask your attorneys whether they can help you with your FLISP application. 

    (The Finance Linked Individual Subsidy Programme application process includes the following: Firstly, the offer to purchase (OTP) is emailed to the government office. Then, the support team will apply for the FLISP subsidy as soon as the home loan is finally approved by a bank. Consequently, the government will issue a guarantee to the transferring attorneys once the FLISP subsidy is approved. Finally, the government office will communicate with the transferring and bond registration attorneys to pay over the subsidy just before the property is transferred at the deeds office.)

    Now, attorneys, did you know that FLISP Assist can help you with the FLISP application?

    paperwork

    That’s right, you don’t have to do all the tedious paperwork yourself.

    • Once your client has indicated that he or she wants to apply for the subsidy and meets the requirements, your firm can hand over the baton to FLISP Assist (a service provided by MDW Inc. Attorneys) to handle the application with the National Housing Finance Corporation (NHFC) or the Department of Human Settlements.
    • Your client would pay a fee of R1,500 to FLISP Assist to handle the application. However, the fee can also be paid over five installments of R300 each. (The fee is refundable in the case of an unsuccessful application but Ts & Cs apply.)
    • Subsequently, you compile the necessary certified documents for the application (all of which you already have available) as per the checklist and send them to the FLISP Assist team, who takes the process from there.
    • And finally, the conveyancing secretary or firm that collaborates in the process receives R200 in commission for each successful application. (Ts & Cs apply.)

    MDW Inc. Attorneys is a private company that, through FLISP Assist, assists conveyancers and their clients with FLISP applications lodged at the Department of Human Settlements or the NHFC. 

    Meyer de Waal, the director of MDW Inc. Attorneys, together with the Gawie le Roux Institute of Law, is hosting a free* seminar for conveyancers and their support staff on the collaboration possibilities between your firm and FLISP Assist. 

    Conveyancers, you can read more and register for the seminar here.  

    *See website for more details. Ts & Cs apply.

    Conclusion

    To summarise, as a conveyancer, you can really change your client’s life by reducing their home loan and helping them to buy their own home for the first time. FLISP – are you buying in?

    Interesting and useful links

    • Read this article on how a domestic worker of 58 purchased her own 2-bedroom home by making use of a FLISP subsidy.  
    • Was your home loan declined due to a bad credit record? Improving your credit profile can greatly increase your chances of securing a home loan. Mobile2budget is a mobile app that helps you to manage your budget and reach a healthy credit score.  
    • Not keen on reading but would rather want to watch a video on FLISP? Well, here it is.  

     

     

     

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