There is still much ignorance about first time home buyer’s subsidies, not just among the previously disadvantaged (at whom the subsidies are targeted) but also among many industry and community leaders who have indicated a willingness to help their own people in applying for these subsidies, says Mike van Alphen, National Manager of Rawson Finance, the Rawson Property Group’s bond origination division.
In particular, says van Alphen, there is still doubt as to exactly who qualifies and what income levels are considered suitable for this type of subsidy.
“FLISP (the Finance Linked Individual Subsidy Programme), which was launched in May this year by the Department of Human Settlements, was widely accepted as a big step forward because it raised the affordability levels of bond applicants, provided they qualified for loans from recognised banks. However, mitigating against success in this particular subsidy,” says van Alphen, “is the fact that there appear to be very lengthy delays (sometimes up to 12 months) in the application process. In addition, the funding in the provincial coffers, despite national funds having been allocated, is very often lacking or already spent.”
Also making life difficult in this field, says van Alphen, is the shortage of development land and the fact that, for many, the R300,000 upper limit on houses to be subsidised is just too low to get the sort of house they want.
“Further complicating the issue,” says van Alphen, “is the fact that, if one ‘reads between the lines’ of many of the statements made, it becomes clear that ‘over-indebtedness’ and ‘tarnished credit records’, the two factors which have most seriously limited all mortgage loans are particularly prevalent at the lower end of the market and in most cases there is even less chance of putting these matters right.”
In his experience, says van Alphen, the vast majority of first time home applicants need help in putting together their loan application and banks and bond originators have a duty to help them to do this, even though such deals may not be very profitable to them.
The most encouraging recent development, said van Alphen, has been that the upper level of the qualifying incomes has recently been considerably raised.
“Previously,” he says, “to qualify for a first time home owner subsidy one had to earn between R3,501 and R7,000. Now the upper level has been raised to R15,000 and it should be pointed out that this applies not just to individuals but to joint monthly household incomes. The prospects for first time home buyers playing a more significant role in our society are improving – with the wider range of incomes now accepted for the subsidy, larger numbers of people will qualify and if their employers and mentors play their part they will be shown how to go about doing so.”