House Mortgage In Kenya – Full Guide
House mortgages in Kenya are available for every Kenyan of 21 years of age and above. We will show you other requirements for getting a house mortgage. The period range for available house mortgages in Kenya is 1 year to 25 years.
A borrower must deposit the downpayment and make the monthly deposits for the agreed period to completion. Defaulting on house mortgages is a criminal offense, and we will show you what happens when a borrower defaults on a house mortgage in Kenya.
After applying for a house mortgage in Kenya, the lender will conduct a background check to determine whether you should be approved. This, among other factors, we will explain in detail, determines whether one is eligible for a house mortgage.
House mortgages, just like other loans, are paid back with interest. The interest rates vary from lender to lender but are still in the same range as the prime interest rate. Different types of house mortgages have different interest rates. Let us find out more below.
Types Of House Mortgages In Kenya
The borrower can choose which type of mortgage suits them best as long as they have the necessary qualifications. The following are the two types of mortgages in Kenya:
- Fixed Mortgage Loans: Fixed mortgages have a fixed interest rate throughout the mortgage period. The interest rate does not go up or down regardless of the country’s prime interest rate.
- Variable Mortgage Loans: Variable mortgages in Kenya have a flexible interest rate. When the country’s prime rate changes, it also changes.
Requirements For House Mortgage In Kenya
To qualify for a house mortgage in Kenya, you have to meet requirements set by the Central Bank Of Kenya to regulate the disbursements of loans. The following are the requirements for a house mortgage in Kenya:
- You must be 21 years of age: The legal adult age in Kenya is 18, but to get a mortgage, you have to be 21 years of age. This ensures that you are not only an adult but mature enough to decide this magnitude.
- Proof of a reliable source of income: The borrower’s income is the collateral for house mortgages in Kenya. To qualify for a house mortgage in Kenya, you must be employed. Most lenders prefer to automatically deduct the monthly payments from the borrower’s monthly salaries. Lenders will ask for documents proving your employment and call your employer to confirm.
- Clean credit record: To qualify for a house mortgage in Kenya, you must be clear of previous debts. This is a requirement that lenders ask to weigh whether a borrower can be trusted to pay back the mortgage in time. Before applying for a house mortgage in Kenya, check your credit record and clear all the pending debts.
- Clean tax records: A lender must ensure that a borrower has cleared with the Kenya Revenue Authority (KRA) before agreeing to a house mortgage loan agreement. Evasion of tax by the borrower may end up affecting the lender. When the ownership changes to such a borrower, it is at risk of being confiscated by the KRA.
- A guarantor is required on rare occasions: This occurs on occasions when a lender cannot fully trust a borrower. A guarantor comes in to reduce the risk. The borrower has to have a close relationship with the guarantor.
House Mortgage Interest Rates In Kenya
The interest rate for a house mortgage in Kenya is 10% to 15%. The interest rates for a house mortgage in Kenya vary depending on the following factors:
- Lender: Different house mortgage lenders have different interest rates for their house mortgages.
- Prime interest rate: The Central Bank Of Kenya sets the optimum interest rate. Lenders use this to set up their interest rates. When the prime rate goes up, the interest rates at every bank also go up.
- The terms of the agreement: A lender agrees with each borrower on the interest rate that will work for both. As a result, different borrowers get different mortgage rates.
How To Apply For House Mortgage In Kenya
Step 1. Request for a mortgage application from your lender
A borrower should ask for a house mortgage application form from your lender. How you fill out the application form will determine whether you are approved for the loan. It is, therefore, essential to fill it without rushing. Conducting research on house mortgages and having legal advice as you fill it out is the best way to handle this. The application form will have the following information required to be filled:
- Personal details.
- The type of mortgage you are interested in.
- Sources of income.
Step 2. Submit the mortgage application form
The next step is submitting the application form to your lender. After completing the house mortgage application form, go through it with a real estate lawyer. Legal advice is essential so that you can be sure that you have filled out the application form correctly. A lawyer guides you on what to fill out for a house mortgage approval. When you and the lawyer are satisfied, you will go ahead to submit the following documents attached to it:
- A copy of your payslip.
- Documentation of other sources of income.
- KRA payment receipts.
Step 3. The lender will contact you on your status of approval
The lender will contact the borrower after going through the application form. In this step, the borrower is informed whether they have been approved for the house mortgage loan. If approved, a borrower is also informed of the mortgage they qualify for. A lender reviews the borrower’s application form, debt history, and income. With this, the lender weighs which mortgage a borrower can afford. If the mortgage is suitable for the borrower, the lender will schedule a meeting to discuss the terms of the agreement.
Step 4. The signing of the mortgage terms of the agreement
A meeting will be held between the lender and the borrower. The lender will come with a lawyer. We would advise hiring a lawyer for this step is vital. During the meeting, the following will be agreed on:
- The period of the house mortgage.
- The means of paying monthly payments.
- The percentage of the downpayment.
- When to start the payment process.
- The action to be taken in case you default.
After agreeing on the terms of the agreement, the lender and the borrower will sign the agreement. A borrower can request more time to review the agreement and ask for more advice. Once it is signed, the deal is considered official.
Step 5. Transference of property ownership from the lender to the borrower
The final step is transferring the property ownership title from the lender to the borrower. This is done after the borrower has deposited the agreed-upon downpayment on the terms. The processing of the transference is behind immediately after the downpayment is deposited. The lender will inform the borrower of the date of title collection. A borrower can move into the house after collecting the title of the house.
Cost Of House Mortgage In Kenya
| House Size | Cost Of House Mortgage |
| 1-bedroom house | 3 million Shillings to 12 million shillings |
| 2-bedroom house | 5 million shillings to 35 million Shillings |
| 3-bedroom house | 6 million Shillings to 60 million Shillings |
| 4-bedroom house | 12.5 million Shillings to 150 million Shillings |
| 5-bedroom house | 20 million Shillings to 200 million Shillings |
You must be 21 years of age and have an active source of income to be eligible for a house mortgage in Kenya. After meeting these requirements, you apply for a house mortgage from a lender. The lender will review your application form and do background research to determine your credit history. If your credit history is clean, you will be approved for a house mortgage.
The legal costs for mortgages in Kenya are 1% to 3% of the total cost of the house. The legal costs vary depending on the following factors:
1. Lender: Different lenders have different legal costs but not far from the range above.
2. Location of house: The legal cost varies depending on the house’s location.
1. You have to have reached at least 21 years.
2. You have to have a clean debt history.
3. You have to have an active source of income.
4. You have to have paid all your taxes.
5. You have to provide documentation proving the above’s legitimacy.
It is worth it to apply for a mortgage in Kenya as long as you meet all the requirements that are:
1. Be of 21 years of age.
2. Have active employment.
3. Have a clean tax and credit record
The terms of an agreement on mortgages in Kenya range from 12 months to 25 years. The borrower has to pay the loan before the end of the period that they agreed with the loan. If the borrower defaults on these terms, the lender will legally repossess the house.