Dynamic repayment of mortgage loans: A solution for the low-income sector?

Abstract

By using a dynamic instalment repayment plan to finance a mortgage loan rather than the usual fixed instalment financing, the threshold at which a prospective homeowner may enter the housing market may be lowered substantially. In this paper this method of financing will be evaluated to determine under which circumstances it could be used to help the low-income group to obtain housing, and also to highlight some of its deficiencies. Historic trends of income are also analysed to determine the income growth potential of the low-income sector. The income growth potential does not seem to distract from the potential of the dynamic repayment of mortgage loans.