Old Mutual – in collaboration with the National Housing Finance Corporation (NHFC) – is launching an innovative home loan offering called the HiP Home Loan which is tailored to the unique needs of lower middle income earners.
The HiP Home Loan is offered by Housing Investment Partners (Pty) Ltd (HiP). The HiP Home Loan provides access to the property market for credit worthy first time home buyers, who earn between R 3,500 to R 20,000 per month and do not qualify for conventional home loans, due to high affordability criteria.
Applicants who do qualify for conventional home loans are restricted to smaller loans, as the size of the loan granted is based on the applicant’s earnings at the time of the application. Due to this approach, a prospective home buyer in this market is often hard-pressed to find a quality house for the loan amount offered.
The distinguishing factor of the HiP Home Loan is its qualifying criteria for affordability, which takes into account, not merely the present income of an applicant, but also the applicant’s future earnings potential.
The HiP Home Loan takes the future earnings potential of its Clients into account so they can purchase a suitable home at an earlier stage. The repayment schedule is linked to the client’s monthly income over a term of 20 years.
As the salary of a Client increases over time, the Client repays more in the later stages of the agreement term, thereby reducing the accumulated interest on the account and repaying the loan finance.
“This approach makes it possible for our Clients to enter the property market approximately 5 years earlier than would have been possible through conventional home loan lending”, says HiP CEO, Richard Gahagan.