Affordable Mortgage Opens Doors For Ordinary Kenyans To Own Homes

When you walk into the Property Hub at the KUSCCO Centre in Upper Hill, Nairobi, you get a homely feel that opens doors to the exciting world of home ownership. Several house plans and impressions strategically sit on a table just next to Patrick Macharia’s office.

Anyone passing through the reception finds himself inevitably glancing at these miniature structures, and so often does Macharia, the Property Hub Manager at Co-operative Bank. Macharia says if these impressions were a song they would have made the office anthem.

“These are some of the houses we are selling and facilitating buyers to acquire through the Co-op Bank Good Home Mortgage,” he said on a recent Thursday morning, pointing to the plan for various units at a prominent estate in Sabaki area near Mlolongo, some 3km off Mombasa Road. “This property is well priced with the lowest unit, a bedsitter or studio, going for just over one million shillings.”

These are among various residential houses Co-op Bank is financing at what Mr Macharia says is the most affordable mortgage rate in Kenya, at just 9.9%, for up to Ksh6 million. Most of these properties are in Nairobi and its environs in areas such as Ruaka, Ngong and along Mombasa Road, with options available for those living in towns and cities outside the capital.

This 9.9% interest rate is way below the market average of 14%, which makes Co-op Bank home loans very attractive especially to first home buyers. The lower rate with up to 20 years’ repayment period has been made possible through a collaboration between Co-operative Bank and state-owned Kenya Mortgage Refinance Company (KMRC).

The partnership between KMRC and Co-op Bank is the first major attempt at making mortgages available to majority of Kenyans, and is seen as a game-changer in realising the affordable housing dream. The mortgage applies to residential houses only and has a limit of Ksh6 million in Nairobi and Ksh5 million outside Nairobi.

“This affordable mortgage was crafted after many months of negotiations and consultations with KMRC, ensuring that the product meets the market needs and especially for the first time home owners,” Mr Macharia said.

Through this partnership, KMRC continues to provide cheap funds to Co-op Bank, for on-lending to property buyers at the affordable rate of 9.9% p.a. This makes it easier for the bank to offer more mortgage loans given that short-term deposits cannot effectively finance such long-term credit facilities.

Kenyans earning not more than Ksh150,000 a month are eligible for this mortgage. The maximum loan amount is capped at Ksh6 million, an indication that this rate is targeted at sustaining the demand for affordable housing being pursued by the government. The house can be standalone bungalow, a unit on an apartment or maisonette.

There is also the option where those with plots can take up the mortgage to fund house construction, while those keen on buying and building, can also take advantage of the buy-plot-and-build product offered by Co-op Bank

Besides affordability, this arrangement has eased many processes including underwriting the mortgage and bureaucracy in key stages such as construction approvals.

Mr Macharia says the Co-op Bank-KMRC mortgage product is the best opportunity for Kenyans to own homes. While the maximum revenue for qualification has been capped at Ksh150,000, anybody below this threshold can take up the mortgage provided they have an income to  service the loan.

“This is a mass-market product,” Mr Macharia said. “With the government pushing units that are priced from Ksh1 million, mortgages are no longer a preserve of the rich. Anyone living in Kenya, employed or self-employed with a legitimate source of income is eligible.”

At the rate of 9.9% p.a., for example, someone can take up a Ksh2 million housing unit, which would be serviced at the monthly repayment of about Ksh20,000. For such a unit, the buyer would be better off servicing the mortgage as opposed to paying rent for a similar unit.

The principle here is one facility per house hold, and the beauty is that spouses can combine their incomes to service one mortgage. This spreads the mortgage across the family as opposed to burdening one individual.

For those earning more than Ksh150,000 a month, “Co-operative Bank has a separate line of home loans and financing arrangement that would still support them own homes through the flexible financing terms,” says Macharia.

To sample some properties visit Good Home Mortgage.

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