Mortgages are becoming more accessible, and a conventional way which buyers are using to acquire properties. Mortgages are mainly being used to purchase homes. Therefore, buyers take mortgages to assist them in purchasing a property. Most of the creditors in Kenya will require the borrower to provide a title deed as collateral for the loan advanced to them.
By December 2017, the number of Kenyans who had home mortgages was 27,000. The number is expected to rise since many people are opting for mortgages for investment. A mortgage is accessible, especially from a majority of the financial institutions. It is worth noting that a mortgage attracts interest.
Steps of Acquiring a Mortgage
The following are the steps used by the creditors to advance a loan.
- Making a mortgage application. You will need to visit your preferred lender for appraisal. The lender will look at your monthly income to determine the amount you qualify for. Your income will also be used to determine the amount of money you will commit yourself to be repaying. The lender will also look into your past financial history to determine your creditworthiness. Among other factors that the lender will look at is your age. The younger you are, then the longer the repayment period.
- Processing of the mortgage. If the lender determines your creditworthiness and then you are in a position to repay the amount, then your request will have to be processed. The process involves you providing the necessary bank details, sale agreement, and the letter of offer and a valuation report.
- Issuance of the offer. Once the processing is successful, the lender will provide the applicant with an offer. The offer letter has terms and conditions of the mortgage. The applicant is required to accept the terms and conditions of the offer. Then the lender proceeds to the perfection of instruments.
- The perfection of instruments. Once the applicant has accepted the terms and conditions of the offer, the lender go ahead to the perfection of the instruments. It is at this stage where the borrower gives details of the property used as collateral. The lender will provide the seller with a certificate of property to complete the transfer of the ownership. The lender then acquires the title and other registration materials and then registers a charge.
- Payment is done. Once registration is complete, the payment is made. The lender pays the amount borrowed to either the borrower or the seller. The process can take between 90 and 180 days. The speed of the process depends on how fast necessary documents are provided. Also, the speed of registration of the property with the relevant authority determines how long the process will take.
Necessary Documents When Applying for a Mortgage
Various documents are needed while applying for a mortgage. However, these documents differ depending on the nature of the mortgage. For instance, when borrowing to buy a house, construction, or buying from a developer.
Mortgage for Buying a House
• A copy of the title deed
• A clearance certificate for land rates
• Letter of an offer or the sales agreement
• Land clearance certificate
Mortgage for Constructing a House
• The original title deed
• Clearance certificate for land rates
• Approved drawings
• Rent clearance certificate
• Project proposal cashflow projections
Tricks to Getting a Cheaper Mortgage
The property market has been marred with massive fraud. Hence, it is essential to do due diligence and do a search with the registrar of land before taking any step. The search is necessary to ascertain the ownership of the property and ensure that the property has no ownership claim from other parties.
Do a valuation of the property to ensure that the value quoted by the seller is accurate. The cost of the property is determined by its location, size, available amenities, and the condition of the property. Then ensure you have a lawyer who is supposed to deposit the necessary documents with the registrar of properties.
The title deed or any documents regarding property ownership remains with the lender until you have fully repaid the loan. You might also be required to make a down payment, which is usually 5 to 20 percent of the property cost. When you pay a higher down payment, then you lower the cost of the mortgage. Also, there are costs associated with mortgages such as legal fees, appraisal fees, valuation fee, transfer and registration of property fee. The total amount incurred sums up to approximately 10 percent of the property price.
If you are planning to build a house or acquire a property, consider seeking a mortgage. However, ensure that you do due diligence search of the property and also ensure that the terms of the lender are convenient.
Vincent is an experienced journalist from Kenya as well as a statistician. He has a degree in Applied Statistics with computing from the University of Eldoret.