Understanding the Different Types of Mortgages in Kenya

Are you looking to buy a house in Kenya but don’t have the cash upfront to pay for it? A mortgage might be just what you need. A mortgage is a loan that you take out to buy property, which you then pay back over a set period of time. In Kenya, there are several types of mortgages available, each with its own terms and conditions. In this blog post, we will discuss the different types of mortgages available in Kenya to help you make an informed decision.

1. Fixed-rate mortgage

A fixed-rate mortgage is a type of mortgage where the interest rate remains the same for the entire term of the loan. This means that your monthly repayments will be the same throughout the life of the mortgage, which can make budgeting easier. The downside is that if interest rates drop, you won’t benefit from the lower rates.

2. Adjustable-rate mortgage

An adjustable-rate mortgage (ARM) is a type of mortgage where the interest rate is tied to a market index, such as the Central Bank Rate or the Nairobi Securities Exchange 20-Share Index. The interest rate can fluctuate up or down over the life of the loan, which means that your monthly repayments can also go up or down. ARMs usually have a lower initial interest rate than fixed-rate mortgages, which can make them more attractive to borrowers. However, they can also be riskier, as your repayments could increase significantly if interest rates rise.

Types of Mortgages in Kenya
3. Interest-only mortgage

An interest-only mortgage is a type of mortgage where you only pay the interest on the loan for a set period of time, usually 5-10 years. After this initial period, you start paying off the principal as well as the interest. Interest-only mortgages can be useful for borrowers who expect their income to increase significantly in the future. However, they can also be risky if your income does not increase as expected, as you may end up with a large principal balance at the end of the interest-only period.

4. Offset mortgage

An offset mortgage is a type of mortgage where your savings and current account balances are offset against your mortgage balance. This means that you only pay interest on the difference between your mortgage balance and your savings and current account balances. Offset mortgages can help you reduce the amount of interest you pay over the life of the loan, as well as allowing you to pay off your mortgage faster.

5.Buy-to-let mortgage

A buy-to-let mortgage is a type of mortgage that is specifically designed for people who want to buy property as an investment and rent it out. Buy-to-let mortgages usually require a higher deposit and have higher interest rates than residential mortgages. They can also be more difficult to qualify for, as lenders will take into account your rental income as well as your personal income when assessing your application.

it’s important to do your research and choose the type of mortgage that’s right for you if you have an interest in getting a mortgage. Consider your current and future financial situation, as well as the state of the housing market and interest rates. It’s also a good idea to work with a reputable mortgage broker or lender who can guide you through the process.

Types of Mortgages in Kenya

At Coast Values Kenya, we offer a range of mortgage options to suit your needs. Our team of experienced mortgage brokers can help you find the right mortgage for your budget and financial goals. Contact us today to learn more about our mortgage options and how we can help you buy your dream home in Kenya.

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