Property prices in Nairobi have doubled, and in some cases tripled, since 2006
Buying a house is in Kenya comes with many benefits and can save you a lot each year. Some of these benefits include deducting the property taxes you pay as a homeowner, among others.
Cognizant of these advantages, thousands of Kenyans are flocking banks, building societies and mortgage companies seeking help financing the purchase of their dream property.
Before approaching any lender, you should consider the following:
1.) Can you afford a mortgage? For starters, mortgage is a loan taken out to buy a house 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.
2.) Price of property: Price of property: Prices of property have soared in Kenya and industry players say the prices in most parts of the city have more than doubled since 2006. The scenario is the same in many other Kenyan towns, including Mombasa, Kisumu, Eldoret and Nakuru.
The high prices of property are linked to Kenyans in the diaspora who are increasingly buying property at home. Businessmen from DRC-Congo, Burundi and Somalia are also said to be buying property in the country as long-term investments.
Find out why high prices have locked out many from home ownership.
3.) 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.
Put another way, can you invest the deposit in another venture that gives you more than say the 15% interest rate that you will save by putting the deposit down? However, its rare in Kenya to get 100% mortgages so some deposit will be required.
4.) 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.
5.) Monthly repayments: From the above, you should now have the bits that will help you decide what type of house you’ll buy based on its monthly or annual cost. You just need to consult a Kenyan mortgage provider on this or just check out for Kenyan real estate websites offering mortgage calculators.
6.) Location: This is a feature unique to Kenya where some banks only offer mortgages in specified towns.
Credits: Kenya Capital Investment Group
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