I sympathise with some of these fellows because they didn’t know what they were doing then. I have made financial mistakes but not as big as this. Kuwa mpole, wamezoea kulamba na kuchovya hali yako.
The truth is that any interest rate beyond 8% is not advisable for rental units in Kenya. Unless you are sure that the appreciation of the unit will cover your costs AND you have enough cash to cover the difference between morgage repayment and rental income.
You have exaggerated. Can’t be 30% sir. It’s 12%- 19%
just going overboard.
kitambo it was a bit better. especially where corporates and Govt (at some pay-grade) negotiated the mortgage on your behalf. in such a scenario the banks know they risk losing more than one customer if they try dry frying you. nowadays with the ego driven hunger for posting results, all finesse flies outta the window. ukiwa a walk-in sole customer they lure you then suck you dry.
Stress inakumaliza
We should also look at the other side of the coin. The inflation rate is currently around 5.7% (someone collect me if I’m long). This is the absolute minimum interes rate that you can charge someone, otherwise your money drinks water. Now, ongeza risk profile ya borrower (mlevi mlevi), risk ya environment (siasa na shinese loans), profit margin ya bank, insurance, brokers fee, legal fees, valuers fees… and then uuziwe nyumba ina cracks.
I remember people who were in some parastatal hapo ma 2K’s. Their mortgages were literally interest free.
Hizi ndio huokeolea watu wengi. Najua mtu alinunua manyumba kadhaa akiwa job through this program and since interest was low, rental income paid for the loan. Yaani pesa ya bure by the time he had serviced the loan.
At the end of the day a mortgage ends up being a loan repayment at over 100% interest. Unaibiwa for a period of 10-15 years.
Then by the time unamaliza kulipa the kids flew out of the nest kitambo
Does this kind of benefit still exist? Can an employer give his employees generous mortgage benefits without attracting huge tax liabilities? The last time I checked they were charging us taxes on airtime provided free of charge by our mhindi.
You don’t know or understand the comfort that comes with owning and living in your own house.
Businesses are always failing especially in these tough economic times which aren’t favoring small set ups, but when you are living in your own place, you are more likely to weather the bust up than someone who’s renting.
Abba, please tell what’s the alternative for a young couple who want to live and work around Nairobi? You went to school well, have a nice job and want to raise your kids in a leafy suburb. What do you do?
Perhaps with the rate of inflation and rapid property appreciation, it may be prudent to lock in with a mortgage payment now than later.
The actual problem is that ‘real middle class income’ has stagnated over the last decade. People are working harder than before but they aren’t getting ahead in life.
Advise to the lady: just leave the house to the bank. Let them foreclose or repossess or whareva. Bora waachane na wewe.
Start on a clean slate pale joska. You are still young and you can recover, rather than slave for the next 30 years.
I know seven civil servants who bought 1/2 an acre in south b for 10m through this program.
Currently the estimated value of the land is btwn 180- 200m.
Ive seen lots of people getting screwed by bank loans esp those who use buildings and land as collateral. Explore other options before you ever take a bank loan in Kenya, unfortunately due to population growth in urban areas, the housing bubble isnt going to burst anytime. Ive never taken a mortgage but I took a loan when I started work to get a plot, I got the cash and went back to pay before the time was up in a few months and it was like for 3yrs. Heh! Am telling you they made me regret clearing early, they charged me so much. I was like whats up with this? You pay late penalties you pay early more penalties, its like you just cant win, how can you clear a loan in a year which you shouldve cleared in 3 years then you are penalised so heavily aiii. Anyway, my motto became that if I cant afford something cash, I can live without it. I dont need that kind of stress ever again in my life. First of all its even against my faith to be in debt or to lend for profit. These guys called me every month to top up the loan when I had it when I cleared with them ,theyre literally begging me to take loans because my credit is great. Live within your means dont turn yourself into a slave for banks
The idea of slaving for 30yrs scares the shit out me…
Umewahi Sikia service charges, security and other hidden charges for home owners hapa nairobi…ongeza tax… Service charge alone can be in excess of 30k per month in leafy areas and 10k other areas… Typically you are the home owner but still cough almost rent for the house
Here we don’t have to stick to the 30. With Accumulated Equity, you constantly upgrade when interest rates are favorable.
To simplify this kind of calculations we could use the rule of 72 to estimate how soon your bank gets double of its principle for any interest rate. Simply divide the 72 by %interest. For example, if you take a lon term loan of any amount at an interest rate of 14%, you will have paid double the principle after approximately 5 years 62 months. Note that this period will be lower because banks tend to ‘lend’ the charges I highlighted in my earlier post.