Do I qualify for a rent-to-own house if I earn R5,500 per month?

The long answer

Unfortunately, it seems that a monthly income of R5,500 would not be enough to qualify for a commercial rent-to-own private contract, as the rent is usually between 15% and 25% higher than standard rent. You would also pay a non-refundable upfront option fee, which is usually 1% to 7% of the home's price.

But you would certainly qualify for the government First Home Finance Subsidy Assistance, which used to be known as FLISP. 

Cape Town Lawyer explains that this is a subsidy that the government gives to SA citizens and permanent residents who have never bought a property before and who are not poor enough to qualify for a fully subsidised (RDP or BNG) house, but are not rich enough to qualify for a bank home loan without a subsidy.

This First Home Finance Subsidy is for people earning between R3,501 and R22,000 per month. The subsidy amount is from R38,878 to R169,264, based on your exact household income. It can be used for a new or existing property, or for building on a serviced site in areas like Eerste River, where there is also an affordable housing development called Forest Village, where the starting price for a house is R379,000.

Some properties in Forest Village are also being resold through private companies like myproperty or Property24. They seem to be priced from R350,000 to R420,000. You could look at those sites too.

The subsidy is administered by the Western Cape Government, and you would need to register on the City’s Housing Needs Register before you could apply for it. You can go to your nearest housing office for advice and assistance to register. You can also register online at CITY CONNECT. If you fulfil all the City’s criteria, you can then apply.  

These are the criteria: 

• You must earn between R3,501 and R22,000.

• You must be a South African citizen or a permanent resident with a valid permit.

•  You must be over 18 years old and legally competent to sign a contract.

• You must be married, cohabiting, or single with financial dependents.

• You must never have owned a house anywhere in South Africa before.

• You must never have had any other government housing subsidy or assistance before. 

• You must have a pre-approved home loan (bond) from a bank.

You need the following documents to apply for the subsidy:

• ID document

• Birth certificates of all the children

The amount of the subsidy that you qualify for depends on your monthly income as follows:

• Income of R3,700 means a subsidy of up to R169,264

• Income of R7,300 means a subsidy of up to R143,187

• Income of R22,000 means a subsidy of up to R38,911.

Cape Town Lawyer explains that you can use the subsidy for: 

1. A deposit towards meeting the purchase price of the house and reducing the home loan from the bank for the house you are buying

2. Paying bond registration costs

3. Paying legal costs like property transfer costs, which involve a conveyancing attorney

They emphasise that you need to get pre-approved for a home loan from a bank first. If you can’t get a pre-approved home loan, you won’t qualify for the subsidy. 

These are the documents you would need to get pre-approved for a home loan from a bank:

• Your ID 

• Your last three months of bank statements

• The latest payslip from your employer

• Details of any debts or other liabilities

• Consent for the bank to carry out a credit check on you.

After that, you find a house that you’d like to buy. 

Then you put in an offer to purchase.

Then you apply to the Department of Human Settlements for FLISP.

If it is approved, the subsidy will be paid into your Home Loan Account once the bond has been registered.

These are the contact details for the Western Cape Department of Human Settlements helpdesk for assistance with FLISP in Cape Town:

• City Housing Database / Needs Register: 021 444 0333 or 0860 106 166

• More tel numbers:  021 483 6488, 021 483 0611, 021 483 0623 or 021 483 8984.

• Email: [email protected]

• Office Address: Ground Floor, ISM Building, 27 Wale Street, Cape Town (Open Monday to Friday, 07:30 – 15:00)

Wishing you the best,
Athalie