Don't take a mortgage... This is why

Mortgage is a financial instrument that is aimed at helping people in acquiring or building homes.

With that in mind I cross checked the Kenyan mortgage costs and realized how expensive and exploitative the interest rates are.. with an average of 13% annually that is one unrealistic way of anyone trying to own a home should go forward with..

Here are the numbers

My example is

A 5 million,  20year mortgage with an interest rate the of 13% a year.

Cost of acquiring the loan is roughly between 10 to 15 percent of the mortgage itself, i.e. 500k to 750k.

           NB; This includes the non refundable application fees, valuation, booking, title transfers, commission, broker fees, legal fees, insurance fee, appraisal fees, ledger fees and stamp duty. All these add up to 10to 15 percent of the total and the client should provide them even before getting the loan or they're deducted after the loan matures hence, not receiving the actual amount of the loan.

 For a 5 million morgage 

monthly premiums aprox ksh 57,000

Total interest to be paid ksh 8.7 million

Loan cost 500 to 750k

Total mortgage cost 14.2 million 

This is one expensive way to own a home 🏘️

After 20years and finally making the payments there is a huge loss to the home.

Why is this?

If the house is worth 5 million today considering the normal appreciation of 3% per year, the value will be around 9 to 10million after the said period. Hence a loss of 4.2 million on the purchase of the house or even more.

 Unless the mortgage interest rates are changed to lower levels owning a home via a mortgage is an extreme mistake. 

#Food for thought

Reference; I calculated the interest rates with the housing finance mortgage calculator