More people to benefit from HFC loans |20 February 2016
More people are set to benefit from various housing loans from the Housing Finance Company (HFC).
This follows the announcement by President James Michel in his State of the nation address this week of a series of decisions taken by government in this regard.
Elaborating on these decisions, the HFC said prior to January 1, 2016, the company assisted clients with a housing loan if their net individual or combined income was below R25,000. As of January 1, 2016, the limit has been raised to a net individual or combined income of R30,000 for new housing loan applications.
This does not change the maximum loan amount under the housing loan schemes which is R400,000 under the 2nd Housing Loan scheme, and SR 850,000 under the Housing Loan Scheme.
The 2nd Housing Loan Scheme is for clients who are constructing on their parents’ property or other property on which they have permission to build whereas the Housing Loan Scheme is for clients who are owners of their own plot of land and wish to construct thereon, or for those who wish to purchase a property.
“It is to be noted that this is not a new loan scheme. It is only an increase in the salary cap that qualifies an applicant for a loan with HFC. The rationale behind this is to allow people earning between R25,000 and R30,000 net to get access of a housing loan since these categories of people were not being assisted by HFC,” said Ronny Palmyre, chief executive of HFC.
Explaining what people should do if they are interested in acquiring such loans, Mr Palmyre said the application procedures remain the same, except for the increased salary limit criteria. That is the application is filled at the client’s respective district, then forwarded to MLUH for case processing, and finally forwarded to HFC for loan processing.
On the higher maximum salary level for housing improvement loan consideration, this has increased from R8,000 to R15,000.
This Home Improvement Loans are intended to help clients with funds to renovate their house. For general renovations the maximum amount is R50,000 and for re-roofing of the house the maximum amount is R100,000.
Previously, HFC assisted clients with a Home Improvement Loan if they were earning a net of R8,000 or below. As of January 1, 2016, the salary limit has been increased to R15,000 net. This means that anyone earning R15,000 or below can be assisted as long as other criteria are met.
Loan repayment term for clients earning up to R10,000 is set at a maximum of five years. However, the loan repayment term for clients earning R10,001 – R15,000 is three years or less.
Home improvement projects that are classified under the Home Improvement Loan schemes include all renovation projects from tiling, ceiling, re-roofing, plumbing and construction/installation of kitchen cabinets, to all small construction projects that are supported with an approved plan such as the construction of veranda, construction of retaining wall etc…
However, HFC does not provide funds to buy furniture.
A person needing such a loan has to apply for a home improvement loan, where applicants need to fill in their application form at their respective district administration office. HFC only assists with one home improvement loan per household and per client until it is paid off.
With regard to housing loans which the president said will be increased from R750,000 to a maximum of R850,000 as of January 1, HFC said the company assists with housing loans under two schemes, namely the 2nd Housing Loan Scheme and the Housing Loan Scheme as explained above..
Both schemes apply to clients earning a net individual or net combined income of R30,000.
The loan amount that clients qualify for will depend on their monthly income and their sustainability. For example, someone earning a net salary of R6,000 per month will not be able to sustain the same loan amount as someone earning R12,000 per month.
Loan amount is calculated based on clients’ net income with repayment amount being calculated at 30%-40% of the net income/combined net income.
The maximum loan repayment term is 23 years, and the loan must be repaid before the client reaches 63 years of age.
HFC also explained the procedure for loans for renovation and repair of pensioners’ homes, which is a recently introduced measure.
As of January 1, 2016, HFC has also been assisting pensioners with a home improvement loan under the pensioner’s scheme. Under this scheme the maximum amounts are the same -- R50,000 for general renovations, and R100,000 for re-roofing. Moreover, under the pensioner’s scheme, the interest is set at 0% and loan repayment term is seven years instead of five years.
This implies that 25% of the loan amount will be subsidised by the government, hence the loan repayment will be based on only 75% of the loan amount.
For example: if a pensioner is assisted with R50,000, 25% will be subsidised by the government and the remaining R37,500 will be the amount that the pensioner will be liable to repay at 0% interest.
Application procedures are the same as that of normal home improvement loans.
These loans are disbursed in more than one disbursement for control purposes, or disbursed according to proforma invoices submitted by clients and disbursed to benefactor.
All pensioners would need a guarantor who is in stable employment to secure the Home Improvement Loan. The guarantor will need to bring forward his ID, latest payslip, bank card or bank statement. In any unfortunate circumstance that the pensioner passes away without completing the repayment, it will be the guarantor’s responsibility to repay the loan.
A pensioner needs to bring along a title deed/permission to renovate from landowner, ID, latest six months bank statement.
Unless they are on a house purchase agreement with PMC then they will require the permission of PMC to carry out the renovation.