Property financing could be the only way to help you become a real estate investor without much turmoil. We all know that investing in real estate requires a lot of money, which you may never be able to save your entire lifetime.
However, you can invest in property if you have a steady income flow. All you need is select the best mortgage loan provider in Kenya to help you with your financing.
This guide will help you know the following:
- Mortgage loan meaning
- Types of mortgage loans in Kenya
- How to qualify for a mortgage loan in Kenya
- 5 best mortgage loan lenders in Kenya
The best loan providers we will discuss here have helped thousands of investors realize their investment dreams.
What is a Mortgage Loan?
A mortgage loan refers to money from financial institutions like Sacco and banks to invest in property or buy a home. In this case, you will get your dream house or invest in real estate.
However, the property you buy stands as security against the loan. Therefore, if you skip multiple installments, the lender will repossess the property regardless of how much you’ve paid.
The more you pay your mortgage loan, the bigger your property equity grows. The good thing is that you can take another loan against the equity and invest in other businesses.
In addition, you can also make profits if you get someone willing to pay a higher cost for the property. You will accept the offer, pay the mortgage in total, and then pocket the profits.
Types of Mortgage Loans in Kenya
There are two types of mortgage loans in Kenya, fixed-rate and floating rate. The difference comes in the calculation of the interest rates.
- Fixed-rate Mortgages
As the name portrays, these types of mortgages have fixed interest rates regardless of loan market changes. Nothing happens to your overal loan repayment if interest increase or reduces during your repayment period.
Your only advantage here is when the market interest rates increase since yours will not change. However, if the rates reduce during repayment, you lose the benefits big time.
- Floating rate Mortgages
With this mortgage type, the lender adjusts the interest rates as they change. So if the rates increase or decrease, they adjust your repayment accordingly.
Your only advantage is when the market rates decrease for a more extended period since you will enjoy a low amount of installments. However, when the rates increase, you will pay higher installments.
How to Qualify for a Mortgage Loan in Kenya
To qualify for a mortgage loan in Kenya, you should have the following qualifications.
- A National ID or Passport
- A three months payslip
- Bank statements of at least one year
- An account with the mortgage loan provider
- An offer letter from the seller, including the prices
- A signed mortgage application form
- Letter from the employer for those employed, including the nature of employment, either permanent and pensionable or contract.
The 5 Best Mortgage Loan Providers in Kenya
These financial institutions will help you buy or build your real estate property at affordable rates.
- Standard Chartered bank
The standard chartered bank helps you get several types of mortgages, such as
- Construction mortgages. This mortgage allows you to build property you like up to your desired standards. The bank disburses this mortgage as the construction takes place. And the good thing is youll pay interest on the disbursed amount.
- Mortgages to non-residents. If you are out of the country, you can take this type of mortgage to buy a home where you’ll settle when you come back home. This loan takes up to 20 years to repay.
- Home mortgages. You take this mortgage when you need to buy a complete home.
Standard chartered bank gives you up to 25 years to repay your mortgage. The loan amount is up to Ksh. 100 million. The interest rates
- KCB bank Kenya
The KCB bank’s home loan enables you to buy or build your dream home. The bank also gives you a loan to buy or build commercial property for renting or reselling.
KCB bank has a property center at Aga Khan Walk, Nairobi, where you can visit to get insights about property buying or building. In addition, they have quarterly property tours in Nairobi and Mombasa metropolitan areas.
The bank has a developers club where investors meet to exchange valuable ideas in the industry. The membership fee to this club is Ksh. 12,000.
- NCBA bank Kenya
NCBA bank can help you with a property loan up to 105%. This bank has an offer of 11.9% p.a up to December 31, 2022. This is among the cheapest mortgage rates in Kenya in 2022.
The interest is calculated in reducing balance, fixed in the first three years. You will have up to 25 years to repay your mortgage.
If you need a loan from this bank, youll fill out an application form and submit it with the requirements. Afterward, if the bank approves your application, they send their property valuer to know the exact price of the real estate.
- Absa Bank Kenya
Absa bank has a wide range of property loans, such as buying or building home loans, equity release loans, remortgages, and loans for buying-to-let properties.
With re-mortgage, you can transfer a mortgage loan from another bank to Absa at affordable rates.
Absa offers massive mortgage amounts you can rely on to buy or build your dream home or commercial property. The interest rate is at 14%, but it’s subject to change in the future. Absa gives you a maximum of 25 years to repay your mortgage loan. You can calculate your repayments here.
- Equity Bank Group Kenya
Equity bank of Kenya offers affordable mortgage and equity loans to non-residents. The minimum mortgage is Ksh. 2 million, and there is no maximum. However, the maximum repayment term is 15 years, which is lower than other banks listed above.
In addition, Equity gives you up to 80% financing.
Bottom Line
Now that you understand more about mortgages, you can make informed decisions when applying for these loans. In addition, it’s essential to have very stable income sources to enable you to pay the mortgage for the required time.
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Frequently Asked Questions
- Is taking a mortgage a good idea?
Yes. It’s a good idea if you plan accordingly. It can help you possess more in a shorter period. We all know how saving money can be challenging. But with a mortgage, you’ll build equity as you pay the loan. That increases your networth within a short span.
- What are the risks of taking mortgages?
An increase in interest rates can drown you financially if you have taken a floating-rate loan. In addition, you will stay in debt for more extended, and you’ll pay a lot of money as interest.
- Can I pay my mortgage early?
Yes, you can pay your mortgage early. For instance, if you pay an extra installment each year, you’ll reduce the interest, overall loan repayment, and repayment term.
- What happens after paying off my mortgage?
Well, you’ll have a higher networth since you’ll be the sole owner of the property. You don’t have to pay more money to the lender.