South African government extends $10,000 interest-free home loan scheme

The Starter Loan program provides an interest-free loan of up to $10,000 to help cover borrowers’ initial costs when buying a home.

An additional $10 million was allocated for the seed loan during the 2021-22 mid-year budget review, which could see more people accessing the program.

Borrowers must also qualify for the main “HomeStart Loan” program, which provides financing to borrowers with a 5% down payment or an 8% down payment for constructions.

The start-up loan is also “repayment free”, which means that no repayment is required for the first five years.

After this time, if the loan is not fully repaid, it may be reconsidered and transferred to the main balance of the HomeStart loan.

Recipients can repay their loan interest-free over five years if they meet eligibility criteria, such as having a net household income of less than $65,000 or $90,000 for couples.

Since the launch of the system at the end of 2019, 705 Starter Loans have been approved:

• Fiscal year 2021-22: 217 (this year to date)
• Financial year 2020-21: 378
• Financial year 2019-20: 110

The total value of start-up loans has reached $6.4 million since its launch, and the value of homes built or purchased under the program is $201 million.

Of those who were approved for a loan, 70% lived in private rentals and a small number were Housing SA tenants.

Social Services Minister Michelle Lensink has urged eligible South Australians looking to buy their own homes to consider a start-up loan.

“During the COVID-19 pandemic, the statistics clearly show that the start-up loan has increased, which could be partly due to the fact that we have expanded the eligibility criteria to include people with moderate incomes,” said Ms. Lensink.

She said that in addition to the seed loan initiative, the state government is delivering 1,000 new affordable homes across the state, priced at prices no higher than $422,050.

That’s “well below” the median Adelaide property price of over $731,000, according to Domain’s latest report.

“Many of these homes are available through share shares and I urge South Australians looking for accommodation to jump over to our new HomeSeeker SA website for more information on how to save and to budget for a home and exclusive affordable home sales,” Ms. Lensink said..

This is in addition to the state’s $15,000 first-time homeowner’s grant available when borrowers build a new home.

Both schemes mean South Australian homeowners could access up to $25,000 to build a brand new home.

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Rachel Horane

Rachel is a financial journalist and joined Savings in 2021. Coming from the FinTech space, her interests include lending technology innovation, real estate, investing, and more. Passionate about educating and informing people about their finances, she hopes to increase the financial literacy of ordinary Australians.