FINANCE: FLISP Firepower – Examining the FLISP subsidy benefits for both the bank and the consumer

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Owning your dream home is something many of us aspire to, however there are can be so many stumbling blocks along the way! Often we are stifled by rising property costs, credit records and the lack of funds to use as a deposit. The Department of Human Settlements has taken it upon themselves to help people reach their dream – this time through something called FLISP.

FLISP ( Finance Linked Individual Subsidy Program) was started to bridge the gap between those who simply could not afford housing and those who could. The subsidy is aimed at those who earn between R3501 and R15 000 per month, have never benefitted from any government housing scheme in the past, and are preapproved for a home loan with a registered financial institution. The subsidy can be anywhere between R20 000 and R87 000, depending on your affordability, and can be used as either a deposit to secure the property or injected straight into your home loan as a way to lower your overall bond repayment period.

The FLISP subsidy can make a huge difference to potential home owners but is also appealing to banks and other lending institutions.

One of the major stumbling blocks in buying a property is having a large sum of cash to act as a deposit to secure the property. “After the 2007/2008 economic downturn we realised that there were fewer aspiring home owners able to meet the strict lending criteria imposed by the banks,” Meyer de Waal, director of conveyance law firm Oosthuizen and Co, explained. “With banks seldom willing to offer 100% home loans, many buyers just don’t have the capital to use as a deposit. This is where things like the FLISP subsidy can be so beneficial to the public. Sadly, few people know about it and are missing out of thousands of Rands in financial aid.”

The other method of using your FLISP subsidy, as a cash injection into your bond, has many benefits too. Fazlin (real name withheld) was one such home owner who recently obtained her subsidy through the help of Meyer and his team. Fazlin fits the FLISP requirements perfectly:

• She is a South African citizen who has never benefited from any housing scheme in the past
• She earns R9900 per month and qualified for a home loan of R355 000, which she opted to pay back over 30 years
• She qualified for a FLISP subsidy of R50 575
• Without the FLISP subsidy, she would have paid the bank the capital loan of R355 000 plus interest of R862 069, for a total of R1 217 069 over 30 years
• By depositing her FLISP subsidy directly into her loan she continues to pay back the same instalment costs but will have paid back her home loan in 14 years and 11 months, saving herself a further R514 210 on repayments

The FLISP subsidy can make a huge difference to potential home owners but is also appealing to banks and other lending institutions. When getting a home loan, the financial institution underwriting the loan is essentially taking a gamble on the applicant’s ability to pay back the money. By adding a FLISP subsidy as deposit or as a direct injection into the bond, it immediately reduces the financial risk for the lender and makes the applicant a “safer bet” than before.

If you want to know more about the FLISP subsidy, go to www.flisp.co.za or contact Oosthuizen and Co through www.oostco.co.za.

Meyer de Waal and Paul de Beyer

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