There are arguably tens of mortgage lenders in Kenya, but how reliable can they be? If you are like the majority of people, you would agree that owning a house or a home in Kenya nowadays is one of the most difficult tasks that is both costly and inconvenient.
The cost of land is constantly growing, as are the costs of construction materials, among other things. If you are considering how you could make your dream of owning a home a reality regardless of your net worth, this is when a mortgage comes into play.
Most of the top Mortgage lenders are banks, but there are other financial institutions that provide mortgage loans including Saccos.
This article will inform you on:
What a mortgage entails
What you’ll need to apply for a mortgage
Where can I acquire a low-cost mortgage?
Kenya’s top mortgage lenders
List of Top Mortgage Lenders in Kenya
What is a Mortgage?
A mortgage is a type of loan. It is a loan provided to homebuyers by banks and other financial entities. The property is utilized as loan collateral. Most banks will want a down payment of 20% of the property’s worth to get started.
One advantage of getting a mortgage is that you own a small portion of the property every time you pay it off. This is not the situation when it comes to paying rent.
Taking out a mortgage on a home divides ownership into two parts: equity (what you own) and debt (what the bank owns). As a result, by making mortgage payments, you accumulate more equity and eventually purchase the home by the end of the amortization period.
Another advantage of getting a mortgage is that you can increase the value of the home after you buy it. Assume you obtain a mortgage of 4,000,000 ksh and purchase a property.
Assume you locate someone interested in the property and willing to pay you 7,000,000 Ksh. If you decide to sell the property at that price, you will have made a tidy sum of 3,000,000ksh. You just need to pay the bank what you owe them, not the profit you made.
Read also, List Of Best Asset Financing Banks In Kenya
Types of mortgage products in Kenya
In Kenya, there are two types of mortgages. This classification is determined by the interest rate paid on the loan.
The loan you take out on your property can be:
a) Floating rate mortgage
This sort of homeowner’s loan, also known as a variable or adjustable-rate mortgage, takes into account fluctuating credit market rates. This means that mortgage rates will fluctuate based on the market.
When interest rates in the credit market are high, so will the mortgage payback rate, and vice versa.
Though dangerous, variable rates are frequently less expensive than fixed rates.
b) Mortgage with a fixed interest rate
The fixed rate, as the name implies, does not change with the credit market. This form of mortgage has a set interest rate that lasts the full loan period.
Fixed-rate mortgages are regarded as the safest, but they are frequently more expensive than variable-rate mortgages. Furthermore, you run the danger of tying yourself into a higher rate in circumstances where interest rates are falling.
Types of Loans offered
To entice as many borrowers as possible, financial institutions make every effort to customize mortgages to a specific clientele. The following loans are likely to be offered by most banks and other financial institutions:
- Owner-occupied residential mortgage- This is for people who want to reside in the home they buy with a mortgage.
- Residential mortgage for investment– This is for those who buy the house as an investment rather than as a permanent dwelling.
- Construction loans– for individuals willing to start from scratch. The money is frequently paid to the contractor, who is in charge of managing the job.
- Top-up loans also known as equity loans- This is a simpler way to obtain additional funds by utilizing the equity you have built up. The loan might be utilized for other purposes as well.
What you need to get a mortgage
Now that you’ve learned everything there is to know about mortgages, here’s what you’ll need to get started on your dream home.
To obtain a mortgage from most banks and other financial organizations, you will need the following documents. However, the exact documents necessary may differ from one institution to the next. To be sure, check with the lender of choice.
The following is a mortgage checklist.
- A completed and signed mortgage application form
- Original copies of your identifying documents, such as your driver’s license or passport
- A letter of introduction from your employer (if you are employed)
- 3 months’ pay stub
- 6 months of certified bank statements
- When trying to buy, a letter of offer or a sales agreement is required.
Kenya’s top mortgage lenders
Here are some of the top mortgage providers in Kenya, as well as the average annual interest rate they charge. Housing Finance, just as the name suggests takes the lead. You might want to look into them if you’re looking to buy your ideal home.
- Housing finance group
- Standard chartered bank 12.2%
- Citibank Kenya 12.5%
- Commercial Bank of Kenya 12.9%
- KCB Bank 13.3%
- NIC Bank Kenya 13.4%
- CFC Stanbic bank Kenya 14.1%
- Barclays Bank of Kenya 14.4%
- Co-operative Bank 14.9%
- Consolidated bank 15.1%
Note: The values are only estimates and may change over time.
DISCLAIMER:
This article does not address specific conditions and is simply meant to provide general information. It should not be used as a substitute for expert counsel or assistance or as the basis for any kind of decision. Users solely assume all risk and responsibility for any action taken as a result of the information contained in this article.
