How to find cheap mortgages

Buying a home is the most expensive transaction that most Kenyans will ever make. The median home value was Sh10.9 million in 2018, according to the Kenya Bankers Association.

Since most people do not have that kind of money in cash, a mortgage — in which you borrow cash from a bank and spend years paying it back — is a great option for many buyers.

Here’s how to find the cheapest mortgage rates in Kenya:

1. Save up for a down payment

Raising a high down payment is a sure way of getting a great mortgage deal. The higher the deposit you put down, the lower the loan you need. And of course the lower the amount you want to borrow, the more interest rate options you get.

The key consideration 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.

2. Shop among multiple lenders

This may sound like a complete no-brainer but you will be surprised that many people do not hunt for cheapest mortgages in Kenya.

Conduct research to ensure that what you are getting from a lender is the best deal in the market. Look beyond your bank. Talk to multiple lenders and explore all their options.

Just like you do when purchasing a car, test drive your loan before proceeding with your purchase. There are quite a good number of mortgage providers in Kenya willing to give you attractive rates, including Equity Bank, HF and Savings & Loan – a subsidiary of KCB.

3. Ask the right questions

There are two things you need to know about 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 the amount you want to borrow and the duration (term) you want to borrow for.

Be sure to ask as many questions as possible regarding the rates that you are signing up for to avoid future shock of interest rates variations.

READ: State mortgage firm KMRC to offer loans at less than 10pc

4. Seek expert advice

From the above, you should now have the bits that will help you decide what type of house you will buy based on its monthly or annual cost.

You just need to consult a housing finance provider on this or just check out for Kenyan real estate websites offering mortgage calculators.

READ: 7 Steps to buying a house in Kenya

5. Don’t bite off more than you can chew

Due to the fast rising prices of houses in Kenya, under rare circumstances will repayments be less than the monthly rent of a home.

It is therefore impossible to expect to repay your loan using your rental income – unless of course you plan to top up from your other sources of income.

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