So, you're ready to buy your first home? Congratulations! Homeownership is a dream for many Kenyans, but navigating the mortgage maze can feel like trying to find a matatu during rush hour. Don't worry; we've got you covered. Let's break down the basics of mortgages, so you can step into your new home with confidence.
But first...
What is a Mortgage?
A mortgage is like a long-term relationship between you and the bank. You borrow money to buy or construct your dream home or set up a real estate investment, and the bank holds the title to the property until you've paid back the loan, with interest. It's a bit like having a financial roommate, but instead of arguing over whose turn it is to do the dishes, you're working together to make your homeownership dreams a reality.
Types of Mortgages Offered by KCB:
- Residential Mortgage: Perfect for those looking to purchase or construct a single unit for their own residence. With a maximum loan tenure of 25 years and up to 90% or 105% financing, you'll be settling into your new home in no time.
- Commercial Mortgage: Ideal for investors looking to purchase or construct multiple units for rental income. With up to 80% financing and a loan tenure of up to 20 years, you can build your property empire one brick at a time.
- Plot & Construction Mortgage: For those who want to buy land (not exceeding 2 acres) and construct their dream home within 6 months. With up to 90% financing and a loan tenure of up to 25 years, you can have your cake and eat it too.
- Diaspora Mortgage: Designed for Kenyans living abroad who want to invest in a residential property back home. With up to 70% financing and a loan tenure of up to 20 years, you can build your nest egg while enjoying life overseas.
- Affordable Housing Mortgage: Tailored for those looking to purchase or construct a single unit for residential purposes, with a maximum mortgage of 10.5 Million in Nairobi and main counties. Enjoy up to 105% financing and a loan tenure of up to 25 years for employed individuals and 15 years for self-employed individuals with the most affordable fixed interest rate of 9% p.a.
Steps to Getting a Mortgage with KCB:
- Step 1: Preliminary Appraisal
Your quest begins with submitting all the required documents and completing a mortgage application form. Consider this the first checkpoint, where you gather the essentials for your voyage.
Once the bank receives a favourable valuation report, the loan processing commences. You’ll then receive a formal offer letter in triplicate, signalling that your journey is about to take off.
- Step 3: Acceptance of Offer
You'll then have to accept and return the three copies of the offer letter, which will be executed by the bank's power of attorney. At this stage, you'll need to pay the appraisal fees and initial insurance premiums for mortgage protection and house owner's comprehensive insurance.
- Step 4: Instructions to Valuer
Next, you'll select a valuer from the bank's approved list. The bank will then issue instructions to the chosen valuer to conduct a valuation report. Prepare to pay the valuation fees at this point.
- Step 5: Conveyancing Process
After accepting the offer, the bank will instruct its appointed lawyers to begin the conveyancing process – the legal transfer of property ownership. During this stage, you'll need to pay the stamp duty, stamp duty on the charge, and the lawyers' fees.
- Step 6: Release/Disbursement Process
The finish line is in sight! Once the bank receives the duly perfected security documents, the funds will be released to you. But before that, ensure you've met all the drawdown conditions on the offer letter and cleared the lawyers' legal fees.
Congratulations! You've reached the end of the mortgage maze. Your loan repayment will commence 30 days after the funds are released, and you'll receive a letter detailing your mortgage account number, monthly instalment, and due date.
Costs to Keep in Mind:
While pursuing your homeownership dream, it's essential to factor in the associated costs. These include:
- Appraisal/Negotiation fees (2% of the loan amount for Affordable Housing) and nil for other market mortgages
- Valuation Fees: Payable to a valuer from our approved panel
- Legal Fees: Payable to our approved lawyers for legal documentation
- Stamp Duty: Payable to the government (4% of the property cost for purchase cases)
- Insurance: Mortgage Protection (0.42%-0.63%), Home Owners Comprehensive Insurance (1.25 per 1000 plus 0.05% of the insurance value), and others as applicable
These costs typically amount to 7-8% of the purchase price, so it's crucial to budget accordingly.
Our Top Tips for First-Time Homebuyers
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Budget Wisely: Know what you can afford. Use an online mortgage calculator to get an estimate of your monthly payments.
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Save for a Down Payment: The more you save, the less you need to borrow. Aim for at least 10-20% of the purchase price.
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Check Your Credit Score: A good credit score can get you better interest rates. Pay off debts and avoid taking new loans before applying for a mortgage.
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Ask Questions: If you’re unsure about anything, ask. Our mortgage advisors are here to help.
Embarking on your homeownership journey in Kenya can feel like a daunting task, but with KCB Bank by your side, you can navigate the mortgage maze with confidence. Remember, our dedicated mortgage team is always ready to answer your questions and provide guidance. So, whether you're a first-time homebuyer or a seasoned investor, let us help you turn your homeownership dreams into a reality.
And there you have it folks. That is all we have for you in this episode, but we will be back with more mortgage gems that you do not want to miss.
Ready to take the next step? Contact KCB Mortgage through email at KCBKenyamortgages@kcbgroup.com or call us through 0711 087 000/0732 187 000.
Until next time…
Over and Out,
Witty Banker.
