Take that Mortgage!
Many young people I meet have a common and extreme aversion to Mortgages. The common understanding appears to be that mortgages are way too expensive in Kenya.” You get to pay twice or thrice the value of the house” they argue.
Leading Kenyan Architect andrew Kimani of FHG Architecture (K) Ltd (FHG) thinks that often this is half the story. Yes, this May be true some of the Time the architect argues. But study the facts closely.
The Stanley and HassConsult Property Index for Quarter 2, 2015, land is the best investment compared with other commodities since 2007. The report says that:
KES 1 million invested at the end of 2007 would have been worth KES 6.17 if invested in Nairobi’s Satellite Towns, KES 5.59 if invested in the Nairobi’s Suburbs, KES 2.01m if invested in property, KES 1.86m if invested in bonds and KES 1.13m if invested in savings”.
Several conclusions may be Made from the above quote by the discerning “home owner to be”
The first is not so obvious- If you do not invest a million shillings in anything you will have nothing after eight years! For emphasis I mean Nil i.e. zilch! There is no use complaining about the expense of mortgages when you blow all you have on sporty play toys and drunkard weekends at Safari sevens! The point is if you don’t invest at all – any other investment least of taking a mortgage will be better.
The second draws directly from the statistics above- Whereas someone who took a mortgage at 15% has paid on A straight line interest calculation 100% the value of their property- the same property has about doubled in value in the same period. To say this in another way the property owner has paid nothing beyond the initial sale price value wise. Crazy but true!!
The third lesson is that you do not have to pay your mortgage over the full 15-20 year mortgage term. Since most of the financial institutions in Kenya are over cautious in their mortgage appraisal they leave many a real possibility to increase their actual payments. A small overpayment sustained can really shave off years off the rear end of the mortgage. Lump sums now and again also have a tremendous impact on the overall interest and term of the loan