i love this analysis

Mortgage holders in here please confirm this!

"A Case Study on a mortgage for a 10M house at KCB Bank whose interest is 13.5 P.a.

The bank requires you to raise a 10% deposit which is 1,000,000 then BANK CHARGES are as follows
Application fee 225,000
Monthly service fee 84,000

THIRD PARTY CHARGES
Stamp duty. 400,000
Legal fees. 133,750 (minimum)
Valuation fees. 100,000
Excise duty. 30,000
Annual life insur. 212,152 (you wonder what this is for)
Fire Insurance 157,500 ( as if fire will burn your house)
The Bank therefore funds the remaining 90% which is 9,000,000 payable in 20yrs (sounds like a good deal right? Hold your horses)
The interest payable to KCB is 17,079,292
Your monthly installment is 108,663.
In other words,by the time you repay the loan you will have spent 27,422,595 for the 10M house. Are we together? And just remember that a house being sold for ksh 10 million probably cost ksh 6m or less to build.
Focus on the 71,163 you pay monthly to the bank as interest only.
Pray that fortunes never change in between forcing you to default on the monthly installments because the bank may become a nightmare.

To those who keep saying your house is an asset, if it’s mortgage, I have nothing to add. For the 20 years you keep paying for that House, you also keep praying that the title is legitimate. A government minister or a parastatal chief can one day wake up drunk and say that the House is built on a grabbed government land. The next day very early in the morning, the bulldozers arrive!
There are other ways to own a House in this Country. Just keep off mortgages. It is a rip off…"

A few saving graces, valuation of mortgage houses due to various factors, somehow end up equaling or slightly favourable than your cumulative payments over the years…

Before a bank takes up a mortgage, my fren, chances you will loose your house due to SANY, fire, or any other unforseen insurable risk are considerably reduced and can be compensated, unlike constructing roho juu kutoka kwa mufuko…

Some rich guys actually lock their investment using mortgage.

Instead of outright buying cash, you fix the cash in a deposit account and use the interest to pay for the mortgage… same thing with major investments, you fix the capital and take up a loan…

Guys moved out of Buruburu, and now they are moving out of Karen. By the time guys wake up, the value of homes in these places will be 10% of what they used to be.

anyone who is smart enough is selling their overpriced garbage in karen to losers wh actually think a quarter acre is worth 50 mirrion. My question still remains: now that a quarter acre is 50 Mirrion, how much do you expect it to be in 5-10 years. Do you think its practical to imagine that it will be worth 100M or 70M in 5-10 years. First of all, very few people have over 10M in their bank accounts. Even fewer people have enough to secure 70 mirrion loan and anyone who takes 70Mirrion loan to buy a house is a fool in my eyess

this is an weak analysis especially the emphasis on total amout to be paid… the only legit complaint here is the “hidden” charges like the ridiculous valuation fees, legal fees na kadhalika, hiyo ni wizi no doubt

regarding the total amount to be paid, remember inflation in Kenya is on average 7% and the risk for huge flactuations are real like if you elect sonko as prezo you can expect 20% inflation but if you elect kibwana 2% is possible so a total of 27M payment over a 20 year period is totally reasonable… note that the bank is giving your 10M today and the 10M will be worth 39M in 20 years if the current average 7% inflation is maintained, so 27M is not a bad ask from the bank considering the other risks

Hehehe you simply don’t get it. Karen is where it is value wise for various reasons…

  1. The subdivisions are still viable to afford a suburban middle class enclave

  2. Level of infrastructure is ok

  3. Security likewise is also fairly acceptable.

  4. The land is finite as a resource, and everybody wants what is not easily available…

  5. When prices rise it takes an economic meltdown, domino effect to bring them crashing down… Maybe Corona stands a wee bit chance…

  6. So rather than prices falling, you are likely to see redevelopment to allow high rise apartments…

  7. Those who lived in Karen for the tranquility moved out, for other tranquil locations… It is the story of urbanisation everywhere… As a rule without fail.

A neighborhood will gentrify, community changes and then boom, all over again in cycles… that’s how towns and cities grow up…

Lastly and mist importantly capital (read money) does not follow everybody, it follows it’s best return to itself…

That Interest Rate in itself is a killer. My house is financed @ 4.1% and I am currently working on lowering it to 3.8%…

  1. The hidden inflated charges are a no no.
  2. Just the thought of paying out 17m over 20 years for your 9m shortfall is excruciating just thinking about…hio mi siwes make.
  3. Sometimes even with education these theories arent practical just because inflation is 7% or whatever year on year doesnt guarantee your houses value will go up by the same…just like it can appreciate it can also depreciate and lots of factors dont remain constant.
  4. Paying 27m over 20 years not knowing what the hood will look like by the time your done paying is a risk i wont take.
  5. A bank is willing to charge you all these costs and also throw in a hefty interest rate…but if you were to open a savings account with their best terms would your savings annuities accumulate that much interest over the same period? I doubt it.
    Hii mradi ni zile za kupea CEO a billion dollar renumeration every 2 years and 10 months.
    If you can afford a million deposit and to also raise 17m over 20 years just save up and shop for somewhere serene and build your crib.
    Patience pays…moto mingi maharaka ya nini na labda utaboeka na hio keja chap chap utamani kuhama and no ones willing to become a tenant huko.

kwenda huko na hizo analysis zako land is not money and money is not land. Just because money inflates does nto mean land will inflate. Land is not a commodity like bread whose price rises with inflation. Many things have to come together for people to be willing to pay a certain amount of money for a certain location and there is simply nothing special about karen that will convince me its value will keep rising for eternity. Hakuna mtu ata niconvince mimi leo ati ukitupa 10M kwa mchanga leo, it is going to be worth more than 30M in 20 years And what the fuck??? There are better business ideas that can earn you those returns and more with 10M

There are many ways to skin a cat… mortgages exist because there are people uptaking them… You might not be one of them at this point in time and that probably makes sense to you… and it’s okay…

Every product that’s in a market is certainly for a target market… And it’s one of the ways available to achieve the homeownership objective… In my opinion. As long as you are oncourae for home ownership thats a wise move.

That said, properties that are eligible for mortgages invariably end up appreciating in value over the life of the mortgage… That is a proven.

Secondly there are two types who take mortgages those who have the money but would rather leverage their cash through a mortgage and those who don’t have the money in hand to develop their property but can afford or have a resource to offset the mortgage repayments securely without fail over its term…

Both these types of people share one thing in common, they have money and/or access to regular cash flows money. And even if they could afford it, they are not willing to sink their own money in the property. For reasons I gave earlier…

Kama wewe ni mtu ya kubambanya, tafazali wachana na any kind of collateral or securitization Jenga tuu pole pole, kienyeji…

Oh and the hood is always fine upto the term and at least a half of the mortgage, if it’s a green field development…

@mpendakazi i feel you. You laid it down like a financial advisor.
When im giving financial advise i like to dumb it down kabisa challenge the investor to think about it, breakdown the numbers and give the investor a clear picture coz many a time ive witnessed an investor regretting and trying to pull out of a contract or product even 2 months in sighting that it dont make sense or they found a more suitable alternative.
My take on finances has always been go organic as much as you possibly can. Steer away from debt regardless of your networth and or cash flows.
And also do a cost benefit analysis…is the client comfortable with it si watu wengi watakubali kupay an extra 8big ones for 9m…waah.
But solid advice assuming all factors remain constant.

you are very naive, land and all types capital investments in general preserve value in times of inflation, all factors held constant, meaning the prices increase with inflation

If you cannot afford it, do without it. Invest until you can.

Nailed it!

msupaa how come you never comment on my posts?

I will in future:D

You mean “in the future”… I read your comment in a Chinese accent

Tell me more about it

The average inflation rate in Kenya is 4-5%…Kenya’s, especially Nairobi’s real estate is largely overvalued. Karen is nowhere near a similar property in USA that would go for the same price, I don’t think any estate in Kenya is as valuable as a property costing the same in USA and even less in Europe(There was a comparison between a chateau in France being waaaay cheaper than a property in Runda). The problem with this is that sooner or later the market will readjust. There was a time where the Japanese palace grounds was valued higher than the whole state of California(Los Angeles, Beverly Hills, San Fransisco, Silicon Valley are all in California) and this ended in premium tears

the abra ka dabra of over valuation is never reversible

no one will acknowledge this but Mzee kibaki’s regime Walituchesa hapa.

now back to ze mazematicks…

roi should never be speculative, a constant instead

market forces make roi on plot appreciation constant subject to status of property I.e shamba Iko kwa swamp, road reserve ama title ni imbo

so take a mortgage…hell you buy a matatu, pay insurance (your acknowledgment that that piece of mabati can get an accident which you want to be protected from liability…not accident) and still drive the bloody mabati at 100km/hr. Hii dunia no Yesu anatuokoa sii uerevu ama ma advise kibao. Yesu tuu