“There is a growing need for 200,000 housing units in this country every year, Kenya can only provide 30,000.” - Benson Wairegi, Group MD,  Britam. “”

In light of the slow uptake in mortgages, some housing firms have seen fit to provide more affordable services to a wider market of consumers. One of the more common products is the flexible mortgage plan.

According to Property Kenya, one of the country’s real estate dealers, a flexible mortgage is a housing loan that gives the borrower the freedom to make payments whenever the money is available. The real estate informer states that borrowers are not penalized for payment delays as long as they operate within the set limits of the mortgage service provider.

Midas Development Limited, a local Real Estate firm notes that fully flexible housing loans calculate interest rates daily. The firm states that, unlike fixed mortgages, flexible loans can give the borrower a chance to manage their payments in a way that matches their cash flow.

Adjustable Rate Mortgages

Francis Ayieko, a Real Estate dealer and the current Head of Research at N-Soko says that Adjustable Rate Mortgages are only effective if current lending rates are low. He states that consumers who opt for this alternative should be ready to deal with the unpredictable nature of the ever-changing housing economy. “The pain has been easing as banks lower their interest rates,” said Francis during an online exchange on an N-Soko forum.

Barclays Bank offers a service which allows borrowers to pay their housing loans based on preferential interest rates on their mortgages. The product, known as the premier home loan, offers an equity release and a Mortgage Reserve account with the bank. (The Guardian defines equity release as the ability to retain the use of one’s house to be used as collateral for the loan).

KCB’s S & L housing loan charges flexible interest rates between 17.5% and 19% per year. The bank’s Property Guide states that there is also a fixed interest rate of 21% per annum. The maximum loan amount disbursed depends on the borrower’s ability to repay the loan. Other lenders have different lending rates with I & M bank credited as the lowest mortgage lender in the banking sector.

Cyclical Mortgages

Cyclic mortgages are housing loans that target periodic income borrowers. Normal housing loans demand fixed monthly deposits and mortgage defaulters are penalized with interest on arrears. Housing Finance reports that the rates vary depending on the different mortgages that clients choose. In 2008, Housing Finance launched a product that would give Kenyans without a regular income the chance to take up mortgages. The housing loan, currently known as a Cyclical Mortgage, gives the borrower more time to make payments in case their salary or, otherwise irregular income, is delayed.

Speaking during a telephone interview with Pesatalk, Housing Finance Marketing Department officers said that they are currently working on a particular cyclic mortgage which will have an allowance of up to 3 months between mortgage payments.

The lender’s product targets small business owners, farmers, the self-employed, professionals working on a contractual basis and people with a periodic income.

What the Borrower Needs

The general requirements for such a mortgage include copies of the borrower’s PIN Certificate, identification documents, a filled application form.

Farmers require a list of expenses for the business, proof of market for the produce, bank statements for the past 3 years and a cash-flow forecast for the next 3 years.

Self-employed applicants require bank statements for the past 1 year, audited accounts for the past 3 years, a business registration certificate, a projected balance sheet and cash-flow projections leading up to the next 3 years.

Current loans from mortgage providers give up to 90% financing for construction and owner-occupied residential arrangements. Housing Finance gives up to 95% while Britam’s CRI provides 100% funding. Investment residential loans get up to 80% funding, according to the company’s statement on Home Owners Mortgages.