Thumeka approached the Transaction Support Centre in November 2019 asking for assistance with applying for a retrospective FLISP subsidy. She had signed the sale agreement for her property in October 2017 but because transfer only took place in April 2018, the sale fell within the two-year retrospective FLISP time limit. The property Thumeka purchased was a 124 square metre, two-bedroom house in Khayelitsha that was valued at R300 000. Thumeka paid R70 000 upfront upon signing the sale agreement from her own savings and took out a R230 000 mortgage bond for the remainder. Thumeka’s monthly bond repayments including insurance amounted to R2 700, approximately 43% of her monthly income. This exceeds the ‘rule-of-thumb’ housing affordability ratio of 30% of gross monthly income. Thumeka was committed to paying her mortgage and never missed a monthly bond repayment, but by the time she approached the TSC she was under severe financial strain.
In addition to the high costs of the property transfer and bond registration process (see Figure 1), Thumeka had incurred unexpected maintenance costs of approximately R13 000 to fix electrical and plumbing problems on the property.
Figure 1: Transfer and bond registration costs
The sale agreement includes a clause that requires the seller to provide an electrical and plumbing compliance certificate (see Figure 2), and prior to the sale the estate agent promised to have an electrician and plumber check the property. But in fact this never occurred. And by the time Thumeka took occupation of the property, transfer has already gone through and she was unable to hold the seller and estate agent liable for the problems.
Figure 2: Sale agreement clause in OTP regarding electrical and plumbing compliance
In addition to maintenance expenses, Thumeka’s mother had become ill during this time and she had to cover additional monthly costs to pay for a caregiver. After sharing her financial concerns with a friend, her friend referred her to the TSC for assistance with the FLISP.
Q: What made you decide to apply for the FLISP subsidy when you did?
“I heard about it from my friend. I was struggling financially. Like after the bond stop order, then I would have very limited amount of money left for me to even eat. Or for anything at home. So I decided to give another try via the office [the TSC].”
The TSC assisted Thumeka prepare her FLISP application, gather the necessary documentation, submit and track the application through the Provincial Department of Human Settlements administration processes. The application was submitted on the 14th of November 2019 and was approved on the 6th of February 2020. In line with Thumeka’s income, the value of the subsidy was R107 056, or approximately 45% of the principal debt owed to the bank. This subsidy would result in her monthly repayment declining from approximately R2 700 to R1 500 (including insurance and monthly service fees).
Table 1: Mortgage loan amount pre-and-post FLISP
Thumeka’s excitement about the subsidy approval was in part dampened by the long delay in the subsidy pay-out. As outlined in Figure 3 below, it took over three months from the date the subsidy was approved for the funds to be paid out to the bank. A full month passed between the letter of undertaking being sent to the bank and the subsidy pay-out. While some leniency can be afforded to the Department due to the Covid-19 national lockdown, other FLISP subsidy applications facilitated by the TSC have also seen long delays between subsidy approval and subsidy pay-out. These delays may not only be a function of the Department’s administration; it is not clear whether the bank’s internal processes might have contributed to this delay. In addition, it took the bank nine days to inform Thumeka that they had received the funds and restructured her loan. This, of course, created immense anxiety for Thumeka.
A full timeline of the FLISP application and pay-out process for this case is provided below.
Figure 3: FLISP application timeline