FLISP – Making homeownership a reality for lower income households
Empowering first-time homeowners with a one-off government-funded subsidy1st Jun 2019
The Finance Linked Individual Subsidy Programme (FLISP) offers an amazing opportunity for qualifying individuals to own their first property.
It’s unfortunate that the details and implications of FLISP are not commonly known, and that there are some misconceptions about its process and value. The benefits, however, are huge, and estate agents and those involved in financing have a crucial role to play in educating prospective buyers and assisting in the process.
We all have a role to play in sharing our knowledge about FLISP to ensure the information is spread, and that it reaches those who can benefit.
As the banking sector plays a vital role in borrower education, we asked Xoli Ndwandwe, Head of Affordable Housing at Nedbank, to share some of what Nedbank is doing.
What is FLISP?
FLISP is a government-driven subsidy programme that aims to empower first-time home buyers. This programme aims to bridge the affordability gap when buyers purchase a property that is financed by a lending institution. The subsidy money can be used as a deposit, or to finance some of the upfront bond-related costs, but this may differ in different provinces. The positive element about the programme is that any South African who qualifies for a bond can get the subsidy, provided they meet the requirements. The subsidy is implemented on a sliding scale and ranges between R27,960 and R121,626 based on the gross monthly household income, with the highest subsidy available to the lowest earners.
FLISP subsidies are available for first-time home buyers with a combined household income between R3,501 and R22,000 per month. The purchase must be financed (as this subsidy is finance linked), and the buyer must be a South African citizen and be mar-ried, cohabiting or single with a dependant. It’s important to note, too, that the new buyer should never have owned property before (even if in a previous marriage) and should never have benefited from a similar subsidy before, e.g. an RDP house. Home buyers who have recently taken transfer and meet the qualifying criteria may also apply but the backdating of the subsidy is applied differently in each province, so whether or not you qualify may depend on where you live.
What are the benefits of FLISP?
The most obvious benefit is to the new buyer who can now per-haps afford a two-bedroom house as opposed to a a one-bedroom house. They may, however, stick to their first choice of home and simply make it more affordable on a month-to-month basis. A pur-chase price of around R680,000 can be achieved for households earning a total gross income of R22,000 per month (based on a 20 year loan with a lending rate of 10%), and R640,000 with an interest rate of 11% (over the same term).
This brings more buyers to the market and increases the level at which they enter, which has a positive effect on the general housing market. In the past the subsidies were quite low, and many estate agents were loath to deal with buyers once they found out that they were planning to apply for a FLISP subsidy. The increased subsidies, however, should make it more attractive to all role players.The subsidy programme also plays a role in the general economic empowerment of ordinary South Africans. Many people may feel that home ownership is impossible, but applying for FLISP may be a game-changer for them, and their descendants.
How does Nedbank plan to be proactive in this market?
Nedbank has taken a proactive role in promoting the FLISP programme. We have very strong relationships with the Department of Human Settlements all across the country to facilitate a smooth application process for our customers. Because of this strong relationship, we are able to assist with the FLISP application process. Furthermore, we encourage the developers and estate agents that we work with in the affordable housing market to participate in the programme.
What is the process?
The approval of financing is obviously still linked to one’s credit profile, and Nedbank tackles the risk profile versus subsidised costs. When FLISP is used upfront in the application process, it improves the client’s loan amount in relation to the property value (LTV), which in turn can reduce the risk of the individual’s profile. We advise clients to maintain good credit profiles to improve their chances of being approved for a mortgage, and therefore to be able to take advantage of the FLISP programme
NOTE– It’s best for the buyer to first confirm that they qualify for a subsidy and to find out the exact details before putting in any offer to purchase. Discuss this with your FLISP agent, bank or nearest Human Settlements office.
Where to find out more
For more information, people are encouraged to visit their nearest Human Settlements offices, National Housing Finance Corporation (NHFC) www.nhfc.co.za (they are an official implementing agency for FLISP appointed by Nation Treasury and do not charge for their services) or speak to their banker.