Most people dream of owing a home. Not only for the sentimental value, but also that owning a home provides a sense of security, and is a good investment since real estate rarely depreciates – it increases in value instead.
Buying a house in cash is out of reach for most Kenyans, making mortgages necessary irrespective of the high interest rates. In July, the Central Bank of Kenya announced a reduction of the base lending rate from 16.5 per cent to 13 per cent; banks have begun to reduce interest rates on mortgages. Micro-finance institutions are also making forays in the mortgages market, a move experts say will further bring down the rates. That’s good news for prospective home buyers.
Currently, only eight per cent of Kenyans can afford to buy a home. With the reduced rate, the lenders hope that more middle and lower income earners will take up mortgages. Ken Monyoncho writes one benefit of mortgages is that the repayments are fixed and not subject to market forces that see rents increase erratically over time. Also, interest paid on mortgage is tax-deductible.
When it comes to repayments, Ken advices that it is possible to agree with the bank to make an extra payment annually. This would cut down the interest payable, and the repayment period. If this is not done, he warns, you may end up paying nearly double the amount you would have saved had you made extra annual payments.
“You can visit a housing mortgage institution or bank and arrange on how you can own a house in your working life. It may be easier than you think. You will only fail if you fail to try.” – Ken Monyoncho’s How to Save Money for Investment.