Buying a home is the most expensive transaction that most Kenyans will ever make. The median home value in the country was Ksh10.9 million in 2018, according to the Kenya Bankers Association.
Since most people do not have that kind of money in cash, a mortgage in which you borrow cash from a bank and spend years paying it back is an integral part of the home-buying operation.
How to get the cheapest mortgage rate in Kenya:
1. Save up for a down payment
Raising a high down payment is a sure way of getting a great mortgage deal. The higher the deposit you put down, the lower the loan you need. And of course the lower the amount you want to borrow, the more interest-rate options you get.
The key criteria in Kenya is always based on whether you are better off reducing your monthly mortgage repayments compared to earning a return in some other form of investment.
One of the most effective strategies to secure a favorable mortgage rate is to save for a large down payment. The larger the deposit you make, the smaller the loan amount you need. Naturally, borrowing less means you have more options when it comes to interest rates. The key consideration in Kenya is whether you would be better off reducing your monthly mortgage repayments compared to the potential returns from other investments.
2. Shop among multiple lenders
This may sound like a complete no-brainer but you will be surprised that many people do not hunt for the best mortgage deals.
Do the necessary research to ensure that what you are getting from a lender is the best deal in the market. Look beyond your bank or Sacco. Talk to multiple lenders and explore all their options.
Just like you do when purchasing a car, test drive your loan before proceeding with your purchase.
There are quite a good number of mortgage providers in Kenya willing to give you attractive interest rates, including Equity Bank, Housing Finance Limited, and Savings & Loan a subsidiary of Kenya Commercial Bank.
While it might seem obvious, many prospective homeowners overlook the importance of shopping around for the best mortgage deals. Conduct thorough research to ensure that you are getting the best deal available. Don’t just rely on your current bank or Sacco; explore options from multiple lenders. Just as you would test drive a car before buying, you should thoroughly evaluate your loan options before making a decision.
Kenya boasts a wide range of mortgage providers offering competitive interest rates, including Equity Bank, Housing Finance Limited, and the Savings & Loan division of Kenya Commercial Bank. Take the time to compare these offers to find the best fit for your needs.
3. Ask the right questions
There are two things you need to know about interest rates generally, the current rate and the future expectations of where interest rates will go.
Current interest rates in Kenya are set depending on the amount you want to borrow and the duration (term) you want to borrow for. Be sure to ask as many questions as possible regarding the rates that you are signing up for to avoid future shock of interest rate variations.
Understanding the intricacies of interest rates is crucial when selecting a mortgage. You need to be aware of both the current interest rate and future expectations regarding rate fluctuations. In Kenya, current interest rates are determined by the loan amount and the duration for which you intend to borrow. Make sure to ask as many questions as possible about the rates you are committing to in order to avoid any unpleasant surprises down the road.
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4. Seek expert advice
From the above, you should now have the bits that will help you decide what type of house you will buy based on its monthly or annual cost. You just need to consult a housing finance provider on this or just check out Kenyan real estate websites offering mortgage calculators.
Once you’ve gathered the necessary information, it’s essential to seek expert advice. Consulting a housing finance provider or utilizing mortgage calculators available on Kenyan real estate websites can help you determine what type of house you can afford based on monthly or annual costs.
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5. Don’t bite off more than you can chew
Due to the fast-rising prices of houses in Kenya, under rare circumstances will repayments be less than the monthly rent of a home. It is therefore impossible to expect to repay your loan using your rental income unless, of course, you plan to top up from your other sources of income.
Conclusion
VAAL Real Estate, established to simplify the process of finding and purchasing homes, has successfully developed a brand dedicated to understanding and meeting the needs of potential and future homeowners. By following the steps outlined above—saving for a substantial down payment, comparing offers from multiple lenders, asking critical questions, seeking professional guidance, and avoiding financial overextension—you can secure the best mortgage rates in Kenya and make your dream of homeownership a reality.
