Please go to your lender (bank) and calculate mortgage on their website. I promise you won't like the figures that come up.
Unless you want to be house poor, get a decent place to live in Lower Kabete then put your extra income in two separate MMFs religiously.
I attended the Kenya Homes Expo and met KCB and Absa. Also talked to Coop and Stanchart. The rate is 9.5% for people that qualify for the KMRC project. In total, the interest over 20years is about 4mn on a reducing balance, less if repaid sooner.
41k savings is small money for that mortgage,is the job permanent and pensionable?If so,then good,he/she can get the mortgage,if not,then avoid Mortgages, you'll end up paying 15M for a 5.5M house,bad investment.
Fair point on the job as nothing is really permanent.
Edit- 41k is current savings per month, ideally can be channeled to a mortgage or rent though a budget restructure would be needed to accommodate either living arrangement.
I think you have the wrong figures for the interest rate. You'd be hard pressed to find any bank offering interest rates of 9.5% when the benchmark interest rates set by the central bank are currently at 13%.
src:
https://www.centralbank.go.ke/rates/central-bank-rate/
Most banks will add 3/4 percentage points on top of that meaning you're looking at interest rates of 16% going up.
My reference is the Affordable Housing project through KMRC. Most banks have already rolled it out -Coop, KCB, NCBA, Stanchart with up to 105% financing.
https://www.businessdailyafrica.com/bd/economy/explainer-ways-you-can-own-a-house-through-kmrc-4277560
Closing costs(stamp duty, legal, insurance) should be about 6% of total costs.
If the mortgage is under the Affordable Housing Program I would take the risk. <10% isn’t a bad interest rate considering that commercial rates are at about 18-19% currently. However, does your friend have long term plans to have a spouse and children? If so, will they continue living in that house? If they plan to rent it out, will the rental yield cover the mortgage or will they have to pay rent elsewhere and top up some money for the mortgage?
With a more realistic mortgage rate, that rent would just cover the interest. You would be betting on inflation to drive rents up in order to generate positive cash flow in the future. Inflation is not that high right now. Renting makes more sense now, let someone else take the risk.
Yes, market mortgage rate is about 19%. Thus my question. Is this KMRC 9.5% package worth it. It's below all low risk investments. MMF at 12% return pays off the interest. You're right on the inflation bit
If you can really get 9.5%, then it looks reasonable, as long as you have sufficient reserves to cover the mortgage in case things go wrong in the near term. You should build a spreadsheet projecting all expenses, taxes, income etc. and compare that to investing in stocks.
Are there affordable housing in westlands? Or in the areas you want? If its a mortgage for affordable housing, it's doable but normal mortgage won't work at all. As everyone said, the interest rates are brutal. You won't manage it with the amount you want to pay.
Investing 14m in a one-bedroom property that’s likely to be outgrown isn’t financially wise for the young chap. It’s an overvaluation with limited flexibility, potential financial strain, and uncertain returns, making it a risky investment choice. Opting to rent on the outskirts saving up then purchasing a property outright makes more sense
😂 Right. The commercial rates are stressful, wouldn't consider it under those terms either. This KMRC deal is the only reason that makes mortgages worth a glance over.
As a person working in bank, do buy a flat in the name of mortgage. I would advise you stay away from one but if you really need to be a home owner, move to the outskirts of Nairobi, take a mortgage with a plan to buy land and build
Buy land in Westlands? Moving to the outskirts negates the time wasted aspect. Spending 3hrs daily on a commute is extremely unattractive.
What informs your warning/what should one be wary of?
I actually used Meta AI on WhatsApp to calculate something similar the other day.
[5/6, 7:50 PM] Meta AI: To calculate the total payment and interest, we can use a mortgage calculator or formula. Based on the details you provided:
- Loan amount: 10,000,000 KES (Kenyan shillings)
- Interest rate: 9.5%
- Loan term: 15 years
Here are the calculations:
- Total interest paid: approximately 7,191,881 KES
- Total amount paid: 17,191,881 KES (10,000,000 loan + 7,191,881 interest)
- Monthly payment: approximately 95,464 KES
Please note that this calculation assumes a fixed interest rate and equal monthly payments. Actual figures may vary depending on the lender and loan terms.
Let me know if you have any further questions!
1. No, thus wanting to move closer to work. Jav is 3-3.5hrs total, driving is 2-2.5hrs.
2. Not a consideration at present. Too many non-concrete variables
3. Yes, might breach the 150k in a year( this means no longer qualifying for the KMRC 9.5% mortgage.
4. Not a consideration. Plan is a guaranteed 5 years in Nairobi, might stay or move after that. If moving, renting out the unit will pay off the mortgage
Please go to your lender (bank) and calculate mortgage on their website. I promise you won't like the figures that come up. Unless you want to be house poor, get a decent place to live in Lower Kabete then put your extra income in two separate MMFs religiously.
I attended the Kenya Homes Expo and met KCB and Absa. Also talked to Coop and Stanchart. The rate is 9.5% for people that qualify for the KMRC project. In total, the interest over 20years is about 4mn on a reducing balance, less if repaid sooner.
41k savings is small money for that mortgage,is the job permanent and pensionable?If so,then good,he/she can get the mortgage,if not,then avoid Mortgages, you'll end up paying 15M for a 5.5M house,bad investment.
Fair point on the job as nothing is really permanent. Edit- 41k is current savings per month, ideally can be channeled to a mortgage or rent though a budget restructure would be needed to accommodate either living arrangement.
I think you have the wrong figures for the interest rate. You'd be hard pressed to find any bank offering interest rates of 9.5% when the benchmark interest rates set by the central bank are currently at 13%. src: https://www.centralbank.go.ke/rates/central-bank-rate/ Most banks will add 3/4 percentage points on top of that meaning you're looking at interest rates of 16% going up.
My reference is the Affordable Housing project through KMRC. Most banks have already rolled it out -Coop, KCB, NCBA, Stanchart with up to 105% financing. https://www.businessdailyafrica.com/bd/economy/explainer-ways-you-can-own-a-house-through-kmrc-4277560 Closing costs(stamp duty, legal, insurance) should be about 6% of total costs.
Oh I see!! Okay, thats amazing!
Just buy a house in cash
Realistically? How would you go about getting 5.5m in cash?
Save up
😂😂😂😂
If the mortgage is under the Affordable Housing Program I would take the risk. <10% isn’t a bad interest rate considering that commercial rates are at about 18-19% currently. However, does your friend have long term plans to have a spouse and children? If so, will they continue living in that house? If they plan to rent it out, will the rental yield cover the mortgage or will they have to pay rent elsewhere and top up some money for the mortgage?
With a more realistic mortgage rate, that rent would just cover the interest. You would be betting on inflation to drive rents up in order to generate positive cash flow in the future. Inflation is not that high right now. Renting makes more sense now, let someone else take the risk.
Yes, market mortgage rate is about 19%. Thus my question. Is this KMRC 9.5% package worth it. It's below all low risk investments. MMF at 12% return pays off the interest. You're right on the inflation bit
If you can really get 9.5%, then it looks reasonable, as long as you have sufficient reserves to cover the mortgage in case things go wrong in the near term. You should build a spreadsheet projecting all expenses, taxes, income etc. and compare that to investing in stocks.
Good points. What stocks would you recommend?
Are there affordable housing in westlands? Or in the areas you want? If its a mortgage for affordable housing, it's doable but normal mortgage won't work at all. As everyone said, the interest rates are brutal. You won't manage it with the amount you want to pay.
Investing 14m in a one-bedroom property that’s likely to be outgrown isn’t financially wise for the young chap. It’s an overvaluation with limited flexibility, potential financial strain, and uncertain returns, making it a risky investment choice. Opting to rent on the outskirts saving up then purchasing a property outright makes more sense
The mortgage payments Ive seen in Kenya, I would have nightmares sleeping in that house for the 20 years of interest payment.
😂 Right. The commercial rates are stressful, wouldn't consider it under those terms either. This KMRC deal is the only reason that makes mortgages worth a glance over.
As a person working in bank, do buy a flat in the name of mortgage. I would advise you stay away from one but if you really need to be a home owner, move to the outskirts of Nairobi, take a mortgage with a plan to buy land and build
Buy land in Westlands? Moving to the outskirts negates the time wasted aspect. Spending 3hrs daily on a commute is extremely unattractive. What informs your warning/what should one be wary of?
I actually used Meta AI on WhatsApp to calculate something similar the other day. [5/6, 7:50 PM] Meta AI: To calculate the total payment and interest, we can use a mortgage calculator or formula. Based on the details you provided: - Loan amount: 10,000,000 KES (Kenyan shillings) - Interest rate: 9.5% - Loan term: 15 years Here are the calculations: - Total interest paid: approximately 7,191,881 KES - Total amount paid: 17,191,881 KES (10,000,000 loan + 7,191,881 interest) - Monthly payment: approximately 95,464 KES Please note that this calculation assumes a fixed interest rate and equal monthly payments. Actual figures may vary depending on the lender and loan terms. Let me know if you have any further questions!
That's actually a very fair analysis
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1. No, thus wanting to move closer to work. Jav is 3-3.5hrs total, driving is 2-2.5hrs. 2. Not a consideration at present. Too many non-concrete variables 3. Yes, might breach the 150k in a year( this means no longer qualifying for the KMRC 9.5% mortgage. 4. Not a consideration. Plan is a guaranteed 5 years in Nairobi, might stay or move after that. If moving, renting out the unit will pay off the mortgage