A mortgage is a loan provided by financial institutions, mostly banks to help home buyers purchase a home. One of mortgage’s biggest advantage is that you get to own a bigger chunk of your property every time you make a mortgage payment. The property in hand acts as the collateral of the loan.
Most lenders will require you to pay an initial twenty percent of the value of the property before going on to pay instalments as agreed with your lender. In the ever sprawling Real Estate market in Kenya, mortgages have come in handy in helping home buyers buy homes efficiently and affordably.
Here are the two types of mortgage plans offered in Kenya
Fixed Mortgage rate
This is often regarded as the most secure yet most expensive mortgage plan offered in Kenya. This alludes to the fact the interest rate is fixed hence doesn’t change throughout the payment plan of your loan. One of its greatest undoings, however, is that the interest rates might fall but you’ll still have to honour your commitment, it, however, protects you from increased interest rates during repaying your loan.
Floating rate mortgage
As the name suggests, a floating mortgage rate is solely dependent on the fluctuating rate of the credit markets. Your loan payment plan is therefore poised to go up and down based on how the credit market is performing. It is, therefore, a double-edged sword as you can either have a high payment mortgage or the vice versa.
What you need to get a mortgage in Kenya
Many mortgage providers have varying requirements to facilitate a mortgage application but these are the basic requirements asked by most financial institutions in Kenya to get one;
• Evidence of income
• Proof that you can take care of underlying fees e.g., legal fees
• Proof that you can get a percentage of the financing to get the loan
• Original copies of your identification documents, ID or Passport
• A signed mortgage application form
p.s the above information ranges from one lender to another.
The application process involves applying for the mortgage-backed by all the necessary documentation needed. The application will then be processed and if it meets the lenders’ bare minimum, they will make an offer showing all the terms of the mortgage. You will then provide your collateral and the initial amount then the bank will cater for the rest of the amount borrowed.
Getting a mortgage plan comes a long way in financing a move into your dream home but while at it, never shy from seeking any valuable advice to avoid any issues in the future.