Financial Advice

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zizo911

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Good Day Fellow MYBB'ers

I am in need of some financial advice and guidance.
So here is the situation...

So last year I bought a car from a dealer, last week I had a look on what is still owed and i saw that it is about R250 000 still that needs to be paid, I currently pay R4000 a month as an installment. I then went online and saw that the settlement value of the car is R155 000, which to me seems very reasonable.

I stay with my mom, and I pay the bond on her behalf, which is about R2000 a month. I do not own my own property. I then proposed to her that I can "buy" the house from her for R300 000 , this will then allow me to continue the bond, BUT at a much lower rate since I am a government employee and will receive a subsidy, so in theory I will pay about R1500 for the bond, and then I can use the money from the home loan to settle the car, that will free up about R4000 a month in expenses, I will then have a paid up car, a property on my name, which we currently live in. I already pay for everything in the house and all expenses.
The problem is though, that my mom owes about R95 000 still on the bond, so that amount will need to be subtracted from the R300 000, which I fully understand.
So would this be a good financial decision?

PS: My mom is unemployed and I am the only one working in the house, my brother and sister are still at school.
 
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location location location

where is the property located?
 
Firstly you can't get a bond and have the money go elsewhere.

So unless you mom plans to pay you the money on the side I'm not sure how that will work out.

Also the bond is for 20 years not just 3-5 years like your car is, so will cost you more if you only pay the standard instalments.

If you boost the instalments you can negate the interest, but then you are probably paying as much as you would for the car anyway so it's pointless.

Why do you suddenly want to do this? You've been paying the car just fine so far.

Rather throw an extra grand a month into the car and pay it off faster.

Then instead of running out to buy another car put that instalment away every month and buy a house down the line of your very own.
 
Though you haven't mentioned the value of the house - don't forget the costs of transferring the house into your name.
Transfer fees, title deeds costs, etc...
 
SauRoNZA said:
Firstly you can't get a bond and have the money go elsewhere.

So unless you mom plans to pay you the money on the side I'm not sure how that will work out.

Also the bond is for 20 years not just 3-5 years like your car is, so will cost you more if you only pay the standard instalments.

If you boost the instalments you can negate the interest, but then you are probably paying as much as you would for the car anyway so it's pointless.

Why do you suddenly want to do this? You've been paying the car just fine so far.

Rather throw an extra grand a month into the car and pay it off faster.

Then instead of running out to buy another car put that instalment away every month and buy a house down the line of your very own.
Click to expand...
My moms would then give me the R300 000 to use. Which I will pay the car off. Which frees R4000 a month from my salary.
 
SauRoNZA said:
Firstly you can't get a bond and have the money go elsewhere.

So unless you mom plans to pay you the money on the side I'm not sure how that will work out.

Also the bond is for 20 years not just 3-5 years like your car is, so will cost you more if you only pay the standard instalments.

If you boost the instalments you can negate the interest, but then you are probably paying as much as you would for the car anyway so it's pointless.

Why do you suddenly want to do this? You've been paying the car just fine so far.

Rather throw an extra grand a month into the car and pay it off faster.

Then instead of running out to buy another car put that instalment away every month and buy a house down the line of your very own.
Click to expand...

I would be able to pay it off much quicker. All extra money would go to the bond.
 
1) You say that property in Lansdowne is expensive but you talk about purchasing it for R300,000. What is the real value of the house, because that is what the transfer duty and costs will be based on?
2) When you look at what you expect your housing subsidy to achieve for you, have you taken into account that it will be taxed at your marginal rate?
 
diapason said:
1) You say that property in Lansdowne is expensive but you talk about purchasing it for R300,000. What is the real value of the house, because that is what the transfer duty and costs will be based on?
2) When you look at what you expect your housing subsidy to achieve for you, have you taken into account that it will be taxed at your marginal rate?
Click to expand...

1) Yes, the reason why the current house is valued so low is because it needs work to be done on it. Maintenence wise, it will cost cheaper to fix than buy aMother place in an area further away. It takes me 5mins to drive to work with traffic. It is valued at R300000.

2) yes.
 
I also suggest you speak to a tax accountant.

You mom cannot simply give you R300k without incurring donations tax on the amount over R100k at 20%. That's R40k donations tax.

There are however ways to not pay any tax if it's structured correctly.

There are no transfer duty on property valued at less than R750k (R900k from March 2017). Only fees would be lawyers fees.

Was the property evaluated by a professional and not simply the municipal valuation? Municipal evaluations are normally lower than market value.
 
signates said:
I also suggest you speak to a tax accountant.

You mom cannot simply give you R300k without incurring donations tax on the amount over R100k at 20%. That's R40k donations tax.

There are however ways to not pay any tax if it's structured correctly.

There are no transfer duty on property valued at less than R750k (R900k from March 2017). Only fees would be lawyers fees.

Was the property evaluated by a professional and not simply the municipal valuation? Municipal evaluations are normally lower than market value.
Click to expand...
I see what you mean. I shall speak to one.

Yes it was evaluated by a professional as well as the municipality. We have all the paper work in order.
 
signates said:
I also suggest you speak to a tax accountant.

You mom cannot simply give you R300k without incurring donations tax on the amount over R100k at 20%. That's R40k donations tax.

There are however ways to not pay any tax if it's structured correctly.

There are no transfer duty on property valued at less than R750k (R900k from March 2017). Only fees would be lawyers fees.

Was the property evaluated by a professional and not simply the municipal valuation? Municipal evaluations are normally lower than market value.
Click to expand...

Not that I'm an expert but... you will need a 'loan agreement' where no interest is levied on the amount. The agreement should state that it's "not at arm's length" - thereby falling outside of National Credit Act, Act 35/2005. Ideally no details on the term of the loan should be stated either.
 
Napalm2880 said:
Not that I'm an expert but... you will need a 'loan agreement' where no interest is levied on the amount. The agreement should state that it's "not at arm's length" - thereby falling outside of National Credit Act, Act 35/2005. Ideally no details on the term of the loan should be stated either.
Click to expand...


Partly right. You will need to add interest. The foregoing of interest would also be classified as a donation.

Your mom can writeoff R100k of the loan to you every year as a donation without incurring donations tax. Within 3 years the loan is gone.
 
signates said:
Partly right. You will need to add interest. The foregoing of interest would also be classified as a donation.

Your mom can writeoff R100k of the loan to you every year as a donation without incurring donations tax. Within 3 years the loan is gone.
Click to expand...
They money just stays in her account, so technically it's her money and she can then use it to pay for 'her' things. In this case car settlement.
 
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