If you earn between R1 000 and R5 000 a month you could be eligible for a home loan from newly launched Gateway Home Loans.
Gateway, which is a subsidiary of the National Housing Finance Corporation, is offering loans of between R10 000 and R50 000 to people with regular jobs. The loan is offered through a bank.
So far, Standard Bank, Nedcor and African Bank have come on board the scheme and David Porteous, Gateway managing director, says he is talking to four other lenders as well.
The loans are made on selected housing projects across the country. At the moment five pilot projects have been approved; three others are in the process of being approved and 40 more are in the pipeline. If all are approved, about 20 000 housing loans will be available.
The loan is not a mortgage because it is not backed up by a bond on the house. It is backed up partly by the money in your retirement fund, and partly by credit guarantees taken out by Gateway.
In a mortgage loan, the bank can repossess your house if you stop making your monthly repayments.
The Gateway loan is different: if you stop making payments the bank can take money out of your retirement fund.
The house will only be repossessed if there is not enough money in the retirement fund to meet your obligations and if it is clear you are able to pay your instalments, but are not paying.
If you are retrenched or lose your job, through disability, for instance, Gateway's own credit guarantees will kick in and the bank will not take action.
"We are not going to try to get blood out of a stone," Porteous says.
The repayments are deducted monthly or weekly from your salary, which means your employer must agree to the scheme.
The employer must approach one of the participating banks on your behalf and the bank will contact Gateway. Gateway will check your employer's credentials and if the application is approved, Gateway will ask the bank to release the money. The money goes directly to the developer, not to you.
But the developer is only paid once the house has been finished and you have signed a "happy letter" saying you are satisfied with the building work.
The interest you pay on your loan will be fixed at a level linked to the going rate on the capital market (where the government's long-term debt is traded). The rate will be capped at 21 percent, so even if capital market rates go above that level, interest rates on new loans will not be fixed higher than this.
The loans are for eight years.
Gateway will finance the scheme through a process called securitisation, which involves the pooling of loans granted by the participating banks.
The loans are then sold as an investment which bears interest.
S A Home Loans, which was launched earlier this year, uses the same securitisation process, but targets high-income households.
WHAT IS GATEWAY
Gateway is a public-private partnership set up in 1998 by the state-owned National Housing Finance Corporation to finance housing for low-income and moderate-income households.
The National Housing Finance Corporation owns 100 percent of Gateway, but moves are underway to sell 49 percent to private investors in South Africa and abroad.
HOW IT WORKS
* You are interested in a house on an approved housing development.
* You approach your employer.
* Your employer approaches one of the accredited banks.
* The bank contacts Gateway.
* Gateway runs a check on the employer to make sure your job is secure.
* Gateway gives the go-ahead to the bank.
* The bank pays the developer once the house is completed.
* You move in.
* Repayments to the bank are deducted from your paycheck weekly or monthly.