Applying for a mortgage is a task that should not be taken lightly. Despite there being a variety of mortgage lenders in the country, not many people know what the best rates are.
Based on data collected from Hass Consult, one of Kenya’s biggest real estate firms, the mortgage market has increased from 7600 homes in 2006 to 20,000 in 2012. This means that more people are taking up mortgages. So what exactly should you do before you apply for one yourself?
Hire a Professional
Smart home-owners are likely to hire a real estate agent to fish out the sweetest deals. Others may not be willing to pay for a professional opinion. They may prefer to do it themselves. It may seem cheap, but you have no idea what the fine print may cost you. A mortgage consultant saves a lot of time and money by looking for all the affordable deals available.
Standard Chartered charges a facility arrangement fee of 1% of the loan (minimum of KES 10,000). This doesn’t include legal and stamp duty fees which can rack up costs of up to KES 65,000 (read this for more information). So consultation fees for a KES 10 million house would be KES 10,000, even if the bank only gives the borrower KES 8 million (80% of the house price).
Weigh Your Options
With bank lending rates falling left, right and center, some may assume that the same applies to mortgages. That is not the case. Mortgage rates have remained relatively steady. According to the Hass Consult Property Index, house lending rates appear to be on the rise due to the ongoing real estate boom.
Before taking out a mortgage, the price of the structure must first be established. Most mortgage lenders expect the home-owner to pay a down payment of 10 to 20%. The lender, usually a bank, pays the rest with the guarantee that the borrower will have cleared his debts within the specified time frame.
A KES 10 million house at a mortgage rate of 20% would rack up expenses of up to KES 19.8 million after a 10-year payment period.
The borrower can negotiate monthly deposits stretched over a 10 year period. The houses cost KES 10.5 million. Hass Consult’s mortgage calculator estimates that the value of the house may triple to at least 31.5 million within the next 10 years. On the other hand, Housing Finance provides up to 90% funding for residential home-occupier loans.
Cheaper Alternatives
For those who are unable to raise the fee, Britam recently launched a Collateral Replacement Indemnity (CRI) service that provides 100% lending to mortgage borrowers. However, the product is still new and banks still require a fraction of the house’s cost before they can let you take a loan.
Real Estate developers may offer cheaper alternatives than banks. These options are often refered to as secondary mortgages. Some developers even give flexible payment plans, depending on what the customer can afford to pay. Take Capital Reality Limited, for instance; the housing developer has 4 bedroom maisonettes off Mombasa Road with a mortgage rate of 14%. Capital reality has so far partnered with CfC, Barclays and I & M bank to offer these reasonable rates on some of their housing units.
Below is a table with local banks and their current mortgage rates for building and construction:
| Mortgage Lender | Mortgage Rate |
| Standard Chartered | 16% |
| I & M Bank | 18% |
| CfC Stanbic | 18.5% |
| KCB S & L | 19% |
| Barclays | 21.9% |
| Bank of Africa | 22% |
| Housing Finance | 23% |
| Co-operative Bank | 23.75% |
| Commercial Bank of Africa | 24% |
| Equity Bank | 24% |
| Family Bank | 24.5% |