What Are The Types Of Mortgages In Kenya?

What Are The Types Of Mortgages In Kenya?

In Kenya, there are two main types of mortgages: fixed-rate mortgages and adjustable-rate mortgages.

In a fixed-rate mortgage, the interest rate remains the same throughout the life of the loan, making it more expensive because the amount remains the same during the lifetime of the loan.

On the other hand, an adjustable-rate mortgage has a varying interest rate, with the initial rate given always being lower, but with time, the interest rate changes upwards. The interest rate in this type of mortgage keeps changing depending on the market structure.

To obtain a mortgage in Kenya, there are legal requirements that must be met, including evidence of income, proof that you can cover costs such as lawyer fees, valuation reports, and stamp duty, and evidence that you can put forward the 10% financing needed to obtain the loan.

The mortgage process in Kenya is tedious and can take up to three months to complete.

Several financial institutions offer mortgages in Kenya, including Kenya Commercial Bank, Housing Finance Group, Consolidated Bank, Citibank Kenya, CFC Stanbic Bank Kenya, Cooperative Bank, NIC Bank, and Commercial Bank of Kenya.

Mortgages in Kenya offer several benefits, including low monthly interest rates, lower interest rates, and the ability to own a property or a home through a mortgage arrangement.

Additionally, there may be opportunities to get relief on your tax burden when buying or refinancing a primary residence at the time of purchase and at re-mortgage.

What Is The Difference Between A Fixed-Rate Mortgage And An Adjustable Rate Mortgage?

When it comes to mortgages, there are two main types: fixed-rate mortgages and adjustable-rate mortgages (ARMs).

The main difference between the two is that with a fixed-rate mortgage, the interest rate is set when you take out the loan and will not change throughout the life of the loan.

With an ARM, the interest rate may go up or down, depending on market conditions.

Fixed-rate mortgages are more expensive than ARMs because the interest rate remains the same throughout the lifetime of the loan.

This predictability and stability make fixed-rate mortgages popular, especially the 30-year fixed-rate loan. The down payment for fixed-rate mortgages is generally lower than that of ARMs.

ARMs, on the other hand, usually have lower initial payments than fixed-rate mortgages, but those payments can rise after the initial rate period.

ARMs have rate caps that limit the amount your interest rate can rise or drop in a single adjustment period. ARMs also have margins, which are the minimum interest rates that lenders will charge.

In summary, the main difference between fixed-rate mortgages and ARMs is that fixed-rate mortgages have a set interest rate that does not change throughout the life of the loan, while ARMs have an interest rate that may go up or down depending on market conditions.

Fixed-rate mortgages are more expensive but offer predictability and stability, while ARMs usually have lower initial payments but can become more expensive over time.

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