The biggest hurdle most first-time home buyers have to cross is the financial cost of the home itself. Not many of us step onto the property ladder and immediately have the monthly income to afford the down payments. Most have us have to make savings plans to build up a sizable deposit before even applying for a loan.
Then there are some of us who a family member who would love to assist in buying your dream home. But how does their financial boost impact your overall buying chances? Let’s have a look at what happens to your gift money before you buy.
A Helpful Financial Boost
There is no denying that gift money from a loved one is very helpful. It might even be crucial for some first-time buyers. In reality, they cannot simply give you the gift money and let that be the end of the story. There are a few things that are worth knowing before you buy a new home.
Is my gift money liable to be taxed?
Whether your gift money is going to get taxed depends on the amount you will receive. Currently, in South Africa, any amount below R100,000.00 will not be taxed. According to SARS, “the first R100 000 of property donated in each year by an individual is exempt from donations tax”. Any amount above that threshold will be taxed.
Can I use my gift money as a deposit?
This is a great idea. If you can add your savings to your gift money, your home deposit will be much larger. This will lower your monthly premium considerably. It will also allow you better affordability in the long run and you’ll have more chance of qualifying for a loan.
Should I consider a loan from my parents or family?
There are ways to set up a loan agreement with your parents. Even though it might be a little awkward at first, creating a loan agreement could help everyone down the line. A benefit of this is that you might be able to negotiate costs and terms with your parents that are affordable.
Receiving gift money from the people you love can make a massive impact on your buying ability. Not only does it make the possibility more attainable, but you will also be able to afford a better deal. If you’re gifted with such a financial boost, you will be well on your way to owning your dream home!
Bardale Village has recently opened our brand-new The Milkwood Townhouse Complex. These units are ideal for first-time buyers and small families. With no transfer cost or attorneys fees, our homes are affordable and secure. Situated within a comfortable distance from Cape Town City Centre, in the idyllic Kuils Rivier suburb. Contact one of our sales representatives if you are interested in booking a viewing appointment.