• Mortgage

How To Ask For A Mortgage In Kenya

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When you hear the word "mortgage," what comes to mind? If you are like the majority of people, you will agree that buying a property with a mortgage in Kenya nowadays is one of the most difficult tasks. To do that is expensive and annoying.

Land prices are always rising, as are the costs of building supplies and many other things.

Now consider a strategy that will enable you to buy your dream home regardless of your financial situation. You can ask for a mortgage.

Definition Of A Mortgage

A loan is a mortgage. It is a loan provided to homebuyers by banks and other financial entities. The property serves as loan collateral. The majority of banks demand a 20% down payment of the property's worth as a starting point.

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One benefit of getting a mortgage is that every time you pay it off, you gain ownership of a small portion of the property. Contrarily, paying rent is a different story.

When a home is mortgaged, ownership is divided into two categories: equity, which is what you own, and debt, which is what the bank owns.

As a result, each time you make a mortgage payment, you increase your equity, and at the conclusion of the amortization period, you own the home.

Having the ability to triple the value of the house after purchase is another benefit of getting a mortgage. Let's imagine you decide to purchase a property with a 4,000,000 Kenyan shilling mortgage. You can be informed on the latest finance news about Kenya with Urban Kenyans.

Let's say you come across someone who is eager to buy the property and is prepared to offer you 7,000,000 shillings.

You would have made a nice profit of 3,000,000 ksh if you decided to sell the property for that sum. The amount you owe the bank must be paid in full; there is no need to pay interest.

Mortgage In Kenya Product Types

In Kenya, there are two distinct forms of mortgages. The loan's interest rate is the basis for this classification.

You have two options for the loan you obtain against your home:

Mortgage With A Floating Rate

This kind of homeowner's loan, often known as a variable or adjustable-rate mortgage, takes changing credit market rates into account. This implies that, depending on the market, the mortgage rate may increase or decrease.

The mortgage repayment rate will be high while credit market rates are high, and vice versa.

Variable rates are frequently less expensive than fixed rates, although they are riskier.

Mortgage With A Fixed Rate

As its name implies, the fixed rate does not change with the credit market. The interest rate on this kind of mortgage is fixed and remains that way for the duration of the loan.

Although fixed-rate mortgages are thought to be the safest option, they are frequently more expensive than variable-rate mortgages. In addition, if interest rates are falling, you run the risk of locking yourself into a higher rate.

loans that you might be offeredIn order to get a lot of people to take out mortgages, financial companies do everything they can to make the loan fit the needs of each customer.

There is a good chance that most banks and other financial institutions will offer the following loans:

Mortgage For A Home That Is Owner-occupied

This is for folks who intend to reside in the home that they borrow money to buy.

Residential Mortgage For Investment

This applies to people who buy a home as an investment rather than their permanent abode. Construction loan for individuals seeking to construct new buildings.

The money is frequently transferred to the contractor, who is the expert in charge of the project.

Upward loans are also known as equity loans. This is a simpler method of obtaining additional dollars using the equity you have built up. Other uses for the loan are possible.

What Is Required To Obtain A Mortgage?

This is what you will need to begin building your dream home now that you are knowledgeable about mortgages.

You will require the following documents to obtain a mortgage from the majority of banks and other financial organizations: Be aware, nevertheless, that the precise documents needed can differ from one institution to the next. To be certain, confirm with the lender of your choice.

House design in Kenya
House design in Kenya

You'll Need This Mortgage Check List

A completed mortgage applicationOriginal copies of your passport or other form of identification. A letter of introduction from your employer (for those employed)three-month paystub. At least six months' worth of certified bank statement. A sales contract or a letter of offer (when looking to purchase).

People Also Ask

How To Get A Mortgage In Kenya?

According to the Central Bank of Kenya, the average mortgage size is Ksh. 8.6 million, the average interest rate charged is 10.9%, and the average repayment period is 11.2 years.

How Long Are Mortgages In Kenya?

Mortgages in Kenya are currently repaid over five to 25 years after banks extended the term of the facilities. The average loan maturity was 12 years, with a minimum of five years and a maximum of 25 years in 2022.

Why Mortgages Are Not Common In Kenya?

The relatively low rate of home ownership in Kenya is attributed to high property prices, a high initial transaction cost such as the initial deposit required to access a mortgage, a lack of credit risk information for those in the informal sector leading to their exclusion, and high interest rates for mortgage loans.

Conclusion

The top mortgage lenders in Kenya are listed here, along with the average yearly interest rate they charge.

When searching to purchase your dream home, you might want to check them out.

  • Standard charter 12.2%
  • Citibank Kenya 12.5%
  • Commercial Bank of Kenya 12.9%
  • Bank KCB 13.3%
  • NIC Bank Kenya 13.4%
  • Kenyan CFC Stanbic Bank 14.1%
  • Kenya's Barclays 14.4%
  • Bank combined 15.1%
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