Home loans south africa: how to finance your first home

Owning a home is not a distant dream. With a home loan, you can make this dream a reality. Banks have been more willing to grant home loans in recent times due to competition between banks and increasing demand.

But how do you finance the home loan? It turns out you have a range of options. We provide an overview:

Options for financing home loans in South Africa

  1. Get a guarantor.
  2. Use a home loan comparison service.
  3. Apply to FLISP, a government programme aimed at low-income buyers

Option A: Get a guarantor

If you’re unsure whether you can secure a home loan based on your own income, you can approach a family member to act as a guarantor.

Not all banks accept the offer of surety by another party, but for those who do, the person signing surety must qualify for the home loan in their own right, and should have a direct interest in the property, like a child living on the premises.

Option B: Use a home loan comparison service

Simply put, a home loan comparison service helps you finance the home loan by getting you the best deal.

A home loan comparison service such as ooba Home Loans will:

  • Liaise between you and the banks
  • Submit your home loan application to multiple banks
  • Present you with the packages offered by all the banks, so you have a range of packages to choose from.

Some banks gave different lending criteria than others, so some banks will offer better deals. Lower interest rates, a longer loan term etc

Some banks are also more likely to accept a home loan application even if your credit score isn’t as high as it could be.

So ultimately, a home loan comparison service gives you the best chance of securing a home loan, and of securing low interest rates on that home loan.

Option C: Government Programmes (FLISP)

If you fall within a low income bracket, you still have a good chance of securing a home loan, thanks to FLISP; a government programme specifically aimed at low income buyers.

How do I qualify for FLISP?

  • Your income must range from R3 501 to R22 000 per month.
  • You must be a South African citizen with permanent residency in South Africa.
  • You must not have received a government housing subsidy before.
  • You must be married or cohabiting OR single with financial dependents.
  • You must be over 18 years old.
  • You must not have owned a fixed residential property before.

How much is the subsidy?

The subsidy ranges from R30 001 to R130 000, depending on your income. The lower your income, the higher the subsidy.

Do I need a source of finance in order to apply?

Yes, but you have a number of options you can use as a source of finance. For example:

  • The beneficiary’s pension/provident fund loan.
  • A co-operative or community-based savings scheme, i.e. stokve.
  • The Government Employees Housing Scheme.
  • Any other Employer-Assisted Housing Scheme.
  • An unsecured loan.
  • An Instalment Sale Agreement or Rent-to-own Agreement.

How do I apply for FLISP?

Find out more about the FLISP application process.

Improve your chances of getting a home loan: Get prequalified

The prequalification process provides you with an idea of what you can afford. This can be used as proof when applying for a home loan; the bank will see that your financial situation has already been assessed and deemed viable for the amount you’re applying for,.

Prequalification also provides you with your credit score. You need to know what it is before applying. A good credit score improves your chances of home loan approval.

You can get prequalified by contacting an expert at ooba Home Loans or by using our free, online prequalification tool, the Bond Indicator.

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