Financing Your First Apartment in Kenya: A Guide

You always remember your firsts. Your first car. Your first job. Your first flight. Nothing beats the magic of the first time. It’s no different when it comes to purchasing your first apartment. This coveted milestone is something that, for many, seems out of reach. However, the challenge isn’t the desire. It is understanding how to finance your purchase smartly. 

This article explores the conventional property financing methods, offers a modern alternative and helps you understand the most suitable options when financing your first apartment in Kenya. 

Financing Your First Apartment In Kenya: The Traditional Way

In Kenya, various financing options are available for those looking to invest in real estate. Here are some common ones for financing your first apartment:

Mortgages

These are loans that are solely for real estate financing. They are typically offered by banks and other financial institutions. You borrow a significant portion of the property’s value and repay it over a specified period with accruing interest. The property itself serves as collateral for the loan. Mortgages are advantageous because they allow you to acquire property without a huge upfront payment, often with competitive interest rates compared to other loan types. They also help you build equity in ownership and are a form of savings. 

The downside, however, is that you may end up paying more interest than you initially borrowed because of compounding interest and other costs such as insurance and legal fees. You also risk foreclosure should you be unable to meet your monthly payments. Moreover, taking on a mortgage means committing to significant, prolonged debt. The approval rate for mortgages is also lengthy because you have to undergo serious vetting by lenders. If you don’t meet their criteria, you miss out on the loan.

SACCO Loans 

Savings and Credit Cooperatives (SACCOs) are a popular property financing mechanism in Kenya. They offer real estate loans to their members for property purchase, construction or renovation. As a member, you build up your eligibility for loans by regularly saving with your SACCO.  

SACCOs provide flexible repayment arrangements, reduced interest rates, and expedited loan approvals for active members. Unlike commercial banks, they have less strict collateral requirements. These make them an attractive option for many real estate buyers in Kenya. While SACCOs are beneficial for financing your first apartment, you still need to be aware of the potential risks:

• Guarantor Requirements: Some SACCOs require members to find guarantors for loans, in contrast to typical banks that rely on collateral and credit scores. This may be difficult if you lack a solid financial history or strong network. 

• Limited Borrowing Amounts: SACCOs generally have a lower borrowing limit than banks. This can hinder your ability to get higher loan amounts needed for bigger projects.

• Limited Savings Access: Some SACCOs limit immediate access to members’ savings which can be inconvenient when you need instant funds for unforeseen expenses. 

Personal Savings

Personal savings is the most linear and hassle-free property financing method. No pre-approvals needed, no interest payments; just you and your hard earned money. However, this method requires meticulous planning and strategy. It’s not wise to have it as your primary option as you can easily deplete your savings acquiring property and have nothing left to cover emergencies. 

Financing Your First Apartment In Kenya: A Modern Alternative

These days, several property developers in Kenya offer buyers flexible payment plans, especially for off-plan properties. Instead of a lumpsum upfront payment, you pay installments over a specified period to the developer. Payment plans are very beneficial when financing your first apartment because:

• They often come with little to no interest charges.

• They don’t require bank approvals or collateral.

• Payments made are in line with construction timelines.

• You start with a small deposit (as low as 20%).

• You build equity as the project appreciates.

To better understand how payment plans work, let’s draw an example from Canto Westlands, the latest studios and one-bedroom development along School Lane, just a few metres from the Sarit Centre. With just $52,000 and a 20% deposit, you can secure yourself a studio unit. The rest of your balance is then spread across a period of 36 months, which is equivalent to the project’s construction period at no interest. Instead of borrowing from a bank, you pay the developer directly. This gives you more flexibility, predictability and control.

Financing Your First Apartment In Kenya: Knowing What Works

Below are some of the factors to consider when financing your first apartment in Kenya: 

Assess Your Financial Situation: Evaluate your income, expenses, and savings to determine whether you can afford to spend on a property. Consider your investment goals and ensure that the purchase aligns with them.

Research: Compare different financing options and understand the terms, interest rates, and payment schedules for each.

Budget for Hidden Costs: Factor in additional costs such as property taxes, legal fees, and maintenance. 

Seek Professional Advice: As a first timer, it’s only wise to consult reputable property partners, lawyers, and financial advisors to guide you through the financing process and avoid fraud. 

Final Thoughts

Purchasing your first apartment is a huge milestone that needs to be handled with meticulous planning and strategy. By understanding your financing options, assessing your financial situation, and engaging professionals, you can make informed decisions and secure the best financing for your needs. Moreover, with developments like Canto Westlands that offer flexible payment plans,this dream is no longer unattainable. If you’re ready to take the first step towards owning your first apartment, contact us and we’ll make it possible.