MONEY CLINIC: How can I manage my home loan?

QUESTION: I am buying my house through SA Home Loans but the deposit required is too high due to me not qualifying for a bigger loan. I even borrowed money from my provident fund but it is still not enough and the balance is now due.

My fear is how much I am going to lose as I have already paid R102 000 out of the R141 000 required. Where can I go for assistance? If I lose this loan I will not qualify for another as all the banks have already declined as my salary is less than the basic requirement. My wife is unemployed.

ANSWER: The basic issue here seems to be one of affordability, says PK van Schalkwyk, a qualified CA working at Fin Global in Hermanus. The home buyer should not stretch his budget too tightly by taking on too much debt and thus land in a position where debt service costs  - interest and repayment of debt - are so high that very little money is left for other living costs. 

And remember that there are other upfront costs involved in buying a house, like transfer and registration costs (for the house and for loans), as well as rates and taxes once you own the property. SA Home Loans has a complete guide to buying property to assist you in this regard and talk to your contact there for professional help.

Keep away from high interest rates 

Above all, keep far away from dubious short term creditors with high interest rates – even if it is a family member. The only help which may be considered is from a well-meaning sponsor that you can trust to keep to favourable terms when you struggle with repayments. 

The ideal is that one should first save enough money to cover a deposit as well as the upfront costs involved, before going into a property buying deal. The reader should however not lose any of the deposit already paid, because it should be in a trust account to be paid back (with interest) if the deal falls through.

But having said the above, owning your own house is an important investment goal everyone should aim for. It mostly represents the ordinary citizen’s first big step towards accumulating wealth and financial security, according to Van Schalkwyk. 

Therefore, apart from exploring all possible sources of extra income, there are some possibilities that the reader should also investigate. First of all he might qualify for the government's Finance Linked Individual Subsidy Program (FLISP), usually available for first time home buyers earning between R3 501 and R22 000 per month. 

Finance Minister Tito Mboweni announced in October last year that a further R1 billion would be made available over the next three years for housing subsidies. A once off subsidy can now amount to anything between R27 960 and R121 626 and will be determined according to your monthly salary. Contact your local office of the Department of Human Settlements. 

Another option is to contact Rent2Buy, the brainchild of the Cape Town attorney Meyer de Waal and longtime residential market innovater. They help people to get into a position to get a loan and buy a home by securing their credit record, converting their rental payments into an installment sale etc.   

Rent2Buy’s details can be found on the website

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