Top 10 Mortgage Providers in Kenya to Consider before Buying a Property

Mortgage, Yes! One of the areas where most Kenyans haven’t yet apprehend. Owning a home or a house is one of the biggest achievement. Not only for Kenyans but to everyone around the world.

With the cost of land is ever-rising, owning a home will remain to be one of the most frustrating and expensive activity. That’s where mortgage comes in. To help you achieve your dream of having a home.

Lets dive in to the below areas to understand how mortgage works:

  • What mortgage means?
  • The advantages of mortgage
  • Types of mortgage in Kenya
  • Types of mortgage loans you might get
  • What you need to get a mortgage
  • Top mortgages providers in Kenya

What is a Mortgage?

It is a loan offered by banks and other financial institutions to home buyers. The property is used as collateral for the loan. To get started, most banks will require a down payment of 20% of the value of the property.

Advantages of Taking a Mortgage

An advantage of taking a mortgage is that you own a little piece of the property every time you pay off the mortgage. Conversantly, this is not the case with paying rent.

Taking a mortgage on a property strips the ownership into two: equity, which is what you own, and debt, which is what the bank owns. Therefore, when making a mortgage repayment, you buy more equity and end up owning the property by the end of the amortization period.

Another advantage of taking a mortgage is that you can trip the value of the property once you have bought it. Let say, for instance, you take a mortgage of Kshs. 10,000,000 and buy a property.

Say, you find a person who is interested in the property and is willing to pay you Kshs. 15,000,000 Ksh. If you chose to sell the property at that amount, you will have made a cool Kshs. 5,000,000. You only require to pay the bank the balance on what you owe them, and not a cent on the profit you made.

NOTE: Taking a mortgage means cutting your expenses and having a solid financial plan to be able sustain yourself!


Types of Mortgages in Kenya

There are two types of mortgages available in Kenya, and is based on the rate paid on the loan.

These are:

  • Floating rate mortgage
  • Fixed rate mortgage

1. Floating rate mortgage

Also called a variable or adjustable-rate mortgage, this type of homeowner’s loans factors in fluctuating credit market rates. What this means is that the mortgage rate will go up or down depending on the market.

When the rates in the credit market are high, the mortgage rate of the repayment will be high and vice versa.

Though risky, variable rates are often cheaper compared to fixed rates.

2. Fixed rate mortgage

As the name suggests, the fixed rate does not fluctuate with the credit market. This type of mortgage has a fixed interest rate that runs through the entire term of the loan.

Fixed rate mortgage is considered the safest but are often more expensive compared to variable rate mortgages. In addition, you risk locking yourself in a higher rate in cases where the interest rates are falling.

NOTE: Since mortgage is a loan, you will need to understand the terminologies of loan and get a plan on how to easily settle your debt in owning you home!

Types of Mortgage loans you might get

To entice a huge number of borrowers, financial institutions try as much as possible to tailor the mortgage for different clients.

Most banks and other financial institutions are likely to offer the following loans:

  • Owner-occupied residential mortgage. This is for those who wish to live in the property they purchase with the mortgage.
  •  Investment residential mortgage. This is for those that purchase the property as an investment and not as their primary residence.
  • Construction loan for those looking to build from the ground The amount is often sent to the contractor are the professionals overseeing the project.
  • To up loans also called Equity loan. This is an easier way of getting extra funds using the equity you have accrued. The loan can be used for other reasons.
a hand holds a single key

What you need to get a Mortgage

Therefore, now that you know all about mortgages, here is what you will need to get started with your dream homes.

For most banks and other financial institutions, you will need the following documents to get a mortgage. Note, however, that the exact documents required may vary from one institution to the other. Check with the lender you prefer just to be sure.

Here is a mortgage checklist you will need.

  • A signed mortgage application form
  • Original copies of your identification documents, ID or Passport
  • An introduction letter from your employer (for those employed)
  • 3 months’ payslip
  • Certified bank statement for at least 6 months
  • Letter of offer or a sales agreement (when looking to purchase)

Top Mortgage providers in Kenya

Here are some of the top mortgages providers in Kenya, and what they charge as the average annual interest rate.

You might want to check them out when looking to buy your dream home.

NOTE: These figure may vary with time, you may want to get the true figures at the time you reading these!

  • Housing finance group
  • Standard chartered bank 12.2%
  • Citibank Kenya 12.5%
  • Commercial Bank of Kenya 12.9%
  • KCB Bank 13.3%
  • NIC Bank Kenya 13.4%
  • CFC Stanbic bank Kenya 14.1%
  • Barclays Bank of Kenya 14.4%
  • Co-operative Bank 14.9%
  • Consolidated bank 15.1%

Kindly share your thoughts on the comment section, Cheers!

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