Welcome news is that HIP Loans are now extended from R650 000 to R950 000
HIP HOME LOANS
Click here to download the HIP Housing Customer Brochure – APRIL 2020 Y C
HIP Home loans will open up the opportunity to home buyers to own their own homes.
HIP & FLISP
A HIP home combined with a FLISP subsidy for a first time buyer will add event more buying power for a first time home buyer!
Good news for property buyers, but even better news for property developers and sellers.
STRETCHING YOUR BUYING POWER!
The affordability ceiling of a first-time buyer who qualifies for a Government FLISP subsidy has been increased from the previous average home loan amount of R 680 000.00 to a value of up to R 870 000.00.
This is a significant property price increase of R 190 000.00; and may change the property industry for first-time buyers and property sellers.
This lines in very well with the increase in the HIP home loan maximum that now stretches to R950 000.00.
This “price jump” means that sellers will have an abundance of buyers for their properties in a market that is currently under strain.
More people can afford to buy their own homes instead of a never-ending cycle of renting.
Further good news is that a property priced under R1 million is also exempt from transfer duty, as per the recent budget speech announcement.
HOW ON EARTH AND WHEN DID THIS HAPPEN?
No changes were implemented to increase the FLISP subsidy amounts, but the outcome as demonstrated below is a welcome relief for the property sector.
There are two reasons for this “price jump”,
The Interest rate adjustment.
The recent 1 % drop in the prime lending rate. This means that on an income of R18 000 per month, a home buyer can qualify for R41 750 more property finance with the new prime interest rate of 8.75% compared to the previous 9.75% interest rate.
The Banks are competing for business and coming to the “party”. They are adjusting the RTI or “Repayment To Income” ratio.
I was blown over recently to learn that two of the financial institutions active in the home loan market were able to bend over backwards to improve their RTI criteria – repayment to income ratio offering and increased their usual income ratio of 30% to 35%.
This was for a home loan applicant with a very good credit score and sufficient affordability”, says Meyer de Waal of MDW INC Attorneys, who assist home buyers with FLISP and home loan applications.
De Waal went on further to explain this phenomenon,
We received a FLISP application for a home loan of R 800 000 already approved by a Bank.
The first check is to establish the gross income of the applicant. The maximum income for a FLISP application is R 22 000.00.
Based on past experience, the maximum home loan a buyer with an income of R22 000 would obtain would be a home loan of +/- R 680 000.
The R 800 000 approval raised alarm bells.
I immediately contacted our home loan originator Chantelle to question the income of the buyer as it will be fruitless to submit a FLISP application if the buyer earns more than R 22 000 per month.
I learned from Chantelle that a home loan for R 800 000 was approved for a client who earns R 19 700 per month.
I asked her: “How did this happen- did the bank make a mistake?”
Chantelle Wallace, a mortgage origination consultant with My Bond Fitness, went on to state,
The financial institutions are looking for exceptional clients.
At the moment I am aware that two home loan lenders are prepared to bend over backwards for clients who have a good credit score and can demonstrate sufficient surplus, or in banking terms, “repayment to income value”.
“Sufficient surplus or repayment to income ratio“ means that the home loan applicant does not have too much debt to service every month and will have a sufficient surplus left of his or her salary after paying the new home loan, living expenses and debt repayment.
In this instance, the bank was willing to extend the usual 30 % ratio of repayment and offered a 35 % RTI.
This increase meant that the home buyer was granted a higher home loan amount and this increased his buying power.
Not every home buyer will qualify for this exceptional home loan offer, and we urge home buyers to educate themselves a bit more how to prepare and groom yourself for a home loan application, before you take the big step to buy a property and apply for a home loan.
HIP HOME LOANS
HIP Home Loans will also add value to property buyers as the price range was improved from R650 000 – R950 000.00 in April 2020.
Meyer de Waal
Young Carr – [email protected]