Mortgages in Kenya

Owning a house in Kenya is one of major landmarks in an individual’s life. It does not matter whether one is rich or poor when it comes to dreaming of owning a house in Kenya. Kenyans take pride in their houses. Even those who are paid peanuts build mabati houses for their use. However, there is another route to take that can enable you get the house you previously only imagined living in. Mortgages in Kenya are fairly new phenomena. This is surprising given that a good number of Kenyans pay huge sums in the form of rent. But as more Kenyans take measures to achieve their resident goals, more banks and companies in Kenya are expanding their mortgage lending.

Types of Mortgages in Kenya

There are two types of Mortgages;

a. Fixed rate mortgages

The borrower will owe a percentage of the loan as interest. This amount never changes and remains constant over the life of the loan.

b. Variable/Adjustable rate mortgages

In this type of loan, changes in the credit market are reflected in the repayment rates. Equal repayments are made on a reducing balance. Part of the interest rate risk is transferred from the lender to the borrower. Variable rate mortgages are widely used where fixed rate funding is difficult to obtain or prohibitively expensive.

Some of the factors that influence the type of mortgage includes:

Interest – this is what banks gain from the loan from the repayments made. Interest may be fixed over the life of the loan or it may be variable, changing at certain predetermined periods. It may rise or it may fall, depending on existing market conditions.

Prepaid amounts – some lenders will limit or restrict prepayment of part or the entire loan. If the borrower decides to prepay, then he may also pay a penalty to the lender for the prepayment.

Amount and frequency of payment – in some cases, lenders may offer the borrower an option to increase or decrease the amount paid, without incurring penalties. The amount paid per period is variable.

Period of the loan – this refers to the time period the loan is lent out for. The borrower may be required to pay the entire amount after that lapsed time period. He may also be required to pay a certain amount at the end of some predetermined period.

Some of the loans offered by lenders includes:

The Owner Occupied Residential mortgage

This is offered to buyers intending to purchase a house to live in. The mortgage is popular among most borrowers, and lenders may lend up to 90% of the total cost of the property. CFC bank is offering up to a 100% of the home’s value.

Investment Residential

This refers to the situation where the borrower intends for the property as an investment and not as their primary home.

Construction Loan

This type of mortgage is directed towards construction of property. The lender may require that the project is overseen by professionals, like architects, engineers, and so forth.

The lender normally disburses the money on an arrears basis to the contractor or person contracted to build.

Top up loans and/or equity release

The lender loans out money on the value of the property. Repaying the mortgage allows one to gain equity in that property. This equity can be availed to the borrower as equity release or top up.

Source: kenya Loans

How to Shop for Mortgages in Kenya

A mortgage is a loan taken out to buy a home with the house acting as the collateral. Under rare circumstances will a mortgage be less than your monthly rental. After adding local authority rates, utility bills, furnishing and maintenance bills, you’ll see your monthly costs go up by at least a third of your rent.

You must therefore look at the likely monthly repayments. There are quite a good number of mortage providers in Kenya willing to give you attractive interest rates, including Housing Finance Limited and Savings & Loan – a subsidiary of Kenya Commercial Bank.

Shopping for a mortgage in Kenya can be very frustrating especially for a fist-timer. Here are six important tips for getting a mortgage in Kenya.

Mortgage Rates in Kenya – Mortgages in Kenya: Price of Property

According to real estate agents in Nairobi, property prices in many neighborhoods in the capital have doubled, and in some cases tripled, since 2006. They say the situation is the same in the coastal city of Mombasa, where new residential and commercial buildings are being sold for unprecedented prices, even before the buildings are completed.

Mortgage Rates in Kenya – Mortgages in Kenya: Your Deposit

The higher the deposit you put down, the lower the loan you need to borrow. And of course the lower the amount you want to borrow, the more interest rate options you get. The key criteria in Kenya is always based on whether you are better off reducing your monthly mortgage repayments compared to earning a return in some other form of investment.

Mortgage Rates in Kenya – Mortgages in Kenya: Interest Rates

There are two things you need to know about Kenya interest rates generally, the current rate and the future expectations of where interest rates will go.

Current interest rates in Kenya are set depending on amount you want to borrow and duration (term) you want to borrow for. Variable interest which basically means that it moves as general interest rates. So future expectations become of added importance.