Affordable Homeownership Made Possible with First Home Finance

Owning a home is a dream shared by many South African citizens and legal permanent residents. However, with the recent prime lending rate increase, this dream can seem out of reach, especially for those who earn between R3 501 and R22 000 per month, commonly known as the "affordable" or "gap" market. These individuals find themselves in a financial grey area where their income is considered too low for traditional bond finance but too high to qualify for government-funded housing options.

First Home Finance, previously known as FLISP (Finance Linked Individual Subsidy Programme) was developed by the Department of Human Settlements to provide sustainable and affordable homeownership opportunities for first-time buyers in South Africa who fall within the aforementioned salary range. This program allows qualifying individuals to purchase or build their first home on an affordable basis, regardless of whether they live in urban or rural areas.

Through First Home Finance, qualifying applicants can choose to buy an existing residential property, new or old, or they can purchase a vacant serviced residential stand connected to a National Home Builders Registration Council (NHBRC) registered homebuilder contract. For those with a desire to build their own home, First Home Finance supports the construction process on a self-owned serviced residential stand or tribal stand (permission to occupy - PTO) through an NHBRC-registered homebuilder.

One of the most attractive aspects of First Home Finance is the once-off financial support it provides to eligible beneficiaries. The amount of assistance ranges from R30,001 to R130,505, depending on the applicant's monthly income. This financial boost significantly reduces the burden of upfront costs and makes homeownership more attainable for those in the affordable market segment. In addition, for homes below R1.1 million, new homeowners will be exempt from paying transfer duty, which removes another financial burden from the purchasing process.

Here is an example to demonstrate the impact of First Home Finance. An individual with a monthly income of R9 000 qualifies for a home loan of R300 000 after the lender's credit and affordability assessment. In this case, First Home Finance would reduce the approved home loan by R93,526, resulting in an eventual home loan amount of R206,474. This reduction makes a significant difference in the affordability of monthly loan repayments.

To access First Home Finance, you can follow a simple application process:

1. Visit the National Housing Finance Corporation (NHFC) website at www.nhfc.co.za or call the NHFC on 010 085 2199 to determine if you meet the qualifying criteria.

2. Check if you qualify for a home loan at a bank of your choice.

3. Identify a house or stand that you wish to buy and conclude a purchase and sale agreement.

4. Obtain a home loan confirmation from the bank or financial institution.

5. Complete and submit an application online through the First Home Finance Application Portal on the NHFC website. The submission of the beneficiary's completed First Home Finance application, along with the required supporting documentation, is typically done by the developer, banks, estate agents, bond originators, or the buyer themselves.

6. Upon the lender's approval of the home loan, the application is forwarded to the NHFC for further processing. The NHFC plays a crucial role in ensuring that eligible beneficiaries receive the necessary financial support to realise their homeownership goals.

First Home Finance opens up a world of possibilities for aspiring homeowners in South Africa's affordable market. However, buyers must inform all parties if they intend on using First Home Finance, so the application can be made as soon as possible and everyone can have realistic expectations of the timeframes involved.

By bridging the gap between traditional bond finance and government housing options, this initiative empowers individuals to purchase or build their first homes with greater ease and affordability.