Financial Advice

[Pitbull]

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.

Here is the short and sweet of it:

Yes, you can do that. However you will need to be disciplined.
On a bond of R 300k you will probably only have to pay about... R 3k per month more around R 2 600 or there about depending on the rate and loan term.
You will not have a car repayment which will loosen up around R 4k per month. If you can push at least R 3k if not the full R 4k into the bond, you will pay it off way sooner and save even more on interest.

Discipline here is key. Don't free up money to spend it somewhere else, use the money loosened to make sure you cut the loan repayments as short as possible. Also you will be getting a R 500 subsidy you not getting now so why not? I would say do it, but do it for the right reasons, not to loosen money up to waste away somewhere else.

 

[Pitbull]

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.

She doesn't have to "pay" him anything, settle the car at her own will does not mean it's a donation. Giving the CASH to him is something different. Also, no transfer duties on bond less than R 900k so another win for him.

 

[TheBadMadMan]

Here is the short and sweet of it:

Yes, you can do that. However you will need to be disciplined.
On a bond of R 300k you will probably only have to pay about... R 3k per month more around R 2 600 or there about depending on the rate and loan term.
You will not have a car repayment which will loosen up around R 4k per month. If you can push at least R 3k if not the full R 4k into the bond, you will pay it off way sooner and save even more on interest.

Discipline here is key. Don't free up money to spend it somewhere else, use the money loosened to make sure you cut the loan repayments as short as possible. Also you will be getting a R 500 subsidy you not getting now so why not? I would say do it, but do it for the right reasons, not to loosen money up to waste away somewhere else.

Don't listen to this man. Buy yourself a nice new golf as a reward for yourself. Go ahead spoil yourself.

 

[AchmatK]

She doesn't have to "pay" him anything, settle the car at her own will does not mean it's a donation. Giving the CASH to him is something different. Also, no transfer duties on bond less than R 900k so another win for him.

Settling his car directly is still a donation from her to him irrespective that he did not get the money. Donations are declared by the donor irrespective if it's cash or kind or paying off a debt.

 

[zizo911]

Here is the short and sweet of it:

Yes, you can do that. However you will need to be disciplined.
On a bond of R 300k you will probably only have to pay about... R 3k per month more around R 2 600 or there about depending on the rate and loan term.
You will not have a car repayment which will loosen up around R 4k per month. If you can push at least R 3k if not the full R 4k into the bond, you will pay it off way sooner and save even more on interest.

Discipline here is key. Don't free up money to spend it somewhere else, use the money loosened to make sure you cut the loan repayments as short as possible. Also you will be getting a R 500 subsidy you not getting now so why not? I would say do it, but do it for the right reasons, not to loosen money up to waste away somewhere else.

Thank you. The subsidy is R1200. So it will make my expensession even less since I'm paying R2500 on my mom bond currently for the bond.

 

[Pitbull]

Thank you. The subsidy is R1200. So it will make my expensession even less since I'm paying R2500 on my mom bond currently for the bond.

There you go.

Your reasoning is spot on. implementing it though is a different monster. As for the R 300k settling the car and what not. There are ways of skinning the cat with no tax due. She can "buy" it from you and so forth. Either way, if you have the discipline, why not. And obviously the extra R 1 200 is a massive plus.

 

[zizo911]

There you go.

Your reasoning is spot on. implementing it though is a different monster. As for the R 300k settling the car and what not. There are ways of skinning the cat with no tax due. She can "buy" it from you and so forth. Either way, if you have the discipline, why not. And obviously the extra R 1 200 is a massive plus.

Thank you. I spoke to my accountant friends this evening and they mentioned there are a few loopholes which can be used to avoid the tax.