HOW TO PAY THOUSANDS OF RANDS LESS THAN THE ASKING PRICE
FOR A BRAND NEW 2 BEDROOMED OR A 3 BEDROOMED HOUSE
in BREDASDORP.
First time home buyers are finding in increasing difficult to buy their own homes.
With interest rates that escalated from 7% to 11.25%, and ever increasing living costs, a first time buyer may for ever wonder – “How do I get my foot in the door to own my own home & how do I save up for a deposit?”
UNIQUE OPPORTUNITY
A unique deferred homeownership opportunity for first time buyers is available in Bredasdorp.
First time home buyers can save thousands of rands and thus qualify easier for a home loan.
As the home loan price is also reduced compared to the value of the property, they will most likely be able to negotiate the best home loan interest rates.
DEFERRED HOMEOWNERSHIP IN BREDASDORP
This opportunity is available for Bredasdorp residents who are buying their first homes.
“Through the Deferred Rent To Own Homeownership Programme,
made available exclusively by the Department of Human Settlements
of the Western Cape and Cape Agulhas Municipality,
this unique opportunity is now available”
This unique opportunity was just extended by Minister Simmers on 31 March from a 2 year to a 3 year Deferred Rent To Own opportunity,
says Meyer de Waal, a conveyancing attorney who developed and designed the unique deferred Rent To Own home ownership module for first time buyers.
HOW FIRST TIME BUYERS CAN SAVE THOUSANDS OF RANDS
- A brand new 2 bedroom house sold for R499 500.00 on the market can be purchased at the reduced price of R341 961.00 – Click here for the listing
- https://www.attorneyrealtorhub.co.za/2-bedroom-house-to-rent-in-bredasdorp-111398307
- A brand new 3 bedroom house on the market for R636 500.00 can be purchased a reduced price of R476 238.00. Click here for the listing
https://www.attorneyrealtorhub.co.za/3-bedroom-house-to-rent-in-bredasdorp-111398472
All costs of transfer and bond registration are also included in the purchase price.
HOW IS IT MADE POSSIBLE?
Through the deferred Rent To Own concept, a first time buyer who is pre-qualified, enters into a Rent To Own agreement with the Cape Agulhas Municipality to buy the home at the price of R499 500.00 for a 2 brand new home, or R636 500.00 for brand new 3 bedroomed home.
“The Rent To Own agreements consist of a lease agreement for a 36 month period, a sale agreement and an option to buy the property at the end of the 36 month lease period”, says De Waal.
The price is fixed for a 36 month period.
During this period the buyer pays rental every month to the Municipality.
DEPOSIT BUILDER
50% of the monthly rental is saved in an interest deposit bearing account as a “deposit builder” for the buyer.
The rental is calculated similar to the rental to be paid on a home loan over a period of 30 years, paid back at the current prime lending rate of 11.75%.
WHY A 30 YEAR REPAYMENT CALCULATION?
“The reason why we used a 30 year repayment term,
is that the expected monthly home loan repayment amount will be lower and reduced
at the end of the 36 month rental term when the property is actually purchased
and a home loan registered, to settle the (reduced) purchase price”,
says de Waal.
36 MONTH DEPOSIT BUILDER & 2 BEDROOM HOUSE
For the 2 bedroom house, the monthly rental will be R4 852.00 per month.
The buyer will also pay the rates and taxes for the property.
50% of monthly rental paid, thus R2 426.00 per month, will be saved as the deposit builder.
The “deposit builder” thus accumulates R87 336.00 saved over the 36 month period, plus interest.
FLISP- FIRST HOME FINANCE SUBSIDY
At the end of the 36 month term, based on the income of the first time buyer, a FLISP subsidy, now known as a First Home Finance subsidy is also applied for, on behalf of the buyer.
As example : To qualify for a home loan R 499 500.00 – R87 336.00 = R412 164.00, a buyer needs to earn R14 415.00 per month.
A first time buyer who qualifies for the subsidy, and who earns R14 415.00 per month can qualify for a R70 303.00 subsidy.
TOTAL DEPOSIT THAT CAN BE DEDUCTED FROM THE PURCHASE PRICE
The total of the Deposit Builder of saved and the subsidy of R70 203.00 amounts to R157 539.00.
This means that the purchase price can be reduced hugely through the Deferred Rent To Own concept.
Thus:
- 2 bedroom house of R499 500.00 – R157 539.00 = R341 961.00
REDUCED AFFORDABILTY CRITERIA
To qualify for a home loan of R341 961.00 monthly income of R11 960.00 is required.
RESULT – MORE FIRST TIME BUYERS WILL HAVE THE OPPORTUNITY TO OWN THEIR OWN 2 BEDROOMED HOMES IN MILL PARK BREDASDORP
36 MONTH DEPOSIT BUILDER & 3 BEDROOM HOUSE
For the 3 bedroom house, the monthly rental will be R6 182.00 per month, and calculated as follows:
The buyer will also pay the rates and taxes for the property.
50% of monthly rental paid, thus R3 091.00 per month, will be saved as the deposit builder.
The “deposit builder” thus accumulates R111 276.00 saved over the 36 month period, plus interest.
FLISP- FIRST HOME FINANCE SUBSIDY
At the end of the 36 month term, based on the income of the first time buyer, a FLISP subsidy, now known as a First Home Finance subsidy is also applied for, on behalf of the buyer.
As example : To qualify for a home loan R636 500.00 – R111 276.00 = R525 224.00, a buyer needs to earn R18 369.00 per month.
A first time buyer who qualifies for the subsidy, and who earns R 18 369.00 per month can qualify for a R48 986.00 subsidy.
TOTAL DEPOSIT THAT CAN BE DEDUCTED FROM THE PURCHASE PRICE
The total of the Deposit Builder of R111 276.00 saved and the subsidy of R48 986.00 amounts to R160 262.00.
This means that the purchase price can be reduced hugely through the Deferred Rent To Own concept.
Thus:
- 3 bedroom house of R636 500.00 – R160 262.00 = R476 238.00
REDUCED AFFORDABILTY CRITERIA
To qualify for a home loan of R476 238.00 monthly income of R16 656.00 is required.
RESULT – MORE FIRST TIME BUYERS WILL HAVE THE OPPORTUNITY TO OWN THEIR OWN 3 BEDROOMED HOMES IN MILL PARK BREDASDORP
COMPARE RENT TO OWN VS A 20 YEAR HOME LOAN REPAYMENT
Herewith the calculation to compare a Rent To Own Deposit Saver & capital reduction VS a “normal” home loan repayment over 2 & 3 and 4 year terms.
| RENT TO OWN WITH MONTHLY SAVINGS FOR 36 MONTHS PURCHASE PRICE R499 500.00 | HOME LOAN REPAYMENT & CAPITAL REDUCTION OF THE HOME LOAN AMOUNT R499 500.00 |
| Rental Deposit Saver @ R2 426.00 x 36 months X 36 months = R87 336.00 The deposit saved is deducted from the purchase price resulting in a substantial savings for the buyer | only +/- R9 500.00 capital repaid after 36 months |
PAY EVEN LESS – APPLY FOR A FIRST HOME FINANCE SUBSIDY
The First Home Finance subsidy applicable for the buyer at the time of exercising the option to buy will then be applied to further reduce the purchase price, enabling the buyer to apply for an even lower home loan amount.
This will ensure further sustainability for a first time home owner.
A FINANCIAL EDUCATED & SUSTAINABLE BUYER
CREATING A NEW GENERATION OF FIRST TIME HOME BUYERS WITH A 60 MONTH HOME OWNERSHIP AFTERCARE PROGRAMME
Through the My Budget Fitness programme and mentorship, and a My Budget Fitness Personal Trainer that guides and mentors the new home owner to be for the duration of the rental period that is included in the deferred Rent To Own concept, it is expected that such a programme, combined with reaching your dream to own your own home, will create a new generation of financial educated and sustainable home owners, going into the future.
This will reduce the risks of lending as first home owners will understand their obligations as a home owner and a borrower, combined with a lower debt ration to the property value.
The track record of paying rental on time for 36 months ought to demonstrate the excellent propensity to a financial institution when the application for a home loan is considered.
REWARDS
Rewards can be added to the programme to incentive buyers to pay their rent every month and on time.
MILL PARK WEBSITE: https://www.millpark.co.za/
Note & Disclaimer: The calculation for each buyer will differ, based on the individual income and credit profile of each buyer. Salary increases must also be considered as such may reduce the subsidy a buyer can qualify for, but may increase the home loan the client may qualify for. Subsidy calculations for each home buyer will also change, depending on the gross household income for each buyer profile. At the time of preparation of this article the new subsidy quantum as from 1 April was not yet available.
Meyer de Waal
My Budget Fitness PTY & MDW INC
06 APRIL 2023
