August 29, 2022


It is said that investing in land is a sure way of securing one’s future. For first-time land buyers, investing in land can be a daunting process. It, however, does not have to be.

Now, anybody can buy land thanks to mortgage financing in Kenya.

Therefore, what is mortgage financing and who can use it?

A mortgage is a debt instrument, secured by the collateral of a given real estate property in this case, a piece of land, that you the borrower are obliged to pay back with a set of fixed payments. Think of mortgage financing as a loan on the property you seek to buy. A lender, in this case, a bank or any financial institution offers you cash up front, you as the borrower then pays for the property using it as collateral.

You are then required to pay back the loan to the lender over a set time-frame.

Types of mortgages in Kenya

Like other financial products, there are different types of mortgage financing which you need to be aware of when assessing the one that perfectly fits your needs.

It is nice to note that the types of mortgage loan will vary from one institution to the other.

You as a borrower need to start looking around to find that which perfectly suits your needs.
In Kenya, mortgage loans are classified according to;

  1. Their terms dates, which mean the number of years the loan takes
    2. The interest rate of the loan that can either be fixed or variable, and
    3. The amount to be paid for each period.

The interest rate charged on mortgage financing is in most cases influenced by the market, which is the demand and supply of the loan. What this means is that bank can at times offer very low-interest rates or high interest depending on the market.

Let us say, for any reason, you entered into an agreement with a bank when the rates are high, a year, or two down the line the bank start offering the same loan at lower interest, you can do what is called refinancing, which means you sign a new agreement with the new lower interest rate.

Refinancing can also make it possible to transfer your mortgage from one lender to the other.

Sounds nice, right?
There are different mortgage options that may include but not limited to;
• Those that help buy a ready-made house.
• Those that finance the construction of a residential home.
• Those that fund the purchase of land or plots.

Where to get a mortgage loan in Kenya

Those employed and those running a small business – self-employed, can access home loan or mortgage financing in Kenya. Most commercial banks in the country offer this loan product.

Housing finance (HFC Limited), an integrated property and financial solution provider is the other great provider of home loans in Kenya. Currently, it is the only mortgage company regulated by the Central Bank of Kenya.

Housing finance also provides mortgages for both employed and those in self-employment.

You have many options. Go out there, talk to your bank, compare their terms with their competitors, and settle on a lender that customizes the loan to your specific needs.

What are the costs associated with Mortgage financing?
A mortgage loan is a long-term contract between you as a borrower and the lender or the finance. Like most business contract, there are some costs incurred to ensure performance.

Some of the cost you may incur when entering into this contract may include:
• Legal fees
• Charge fees
• The cost of valuation
• Stamp duty when transferring ownership documents
• The cost of insuring the property

To be on the safe side, have a mortgage specialist walk you through all the cost and requirement of the loan.

The process of getting a mortgage

The process starts with making an application to the lender. The application will be considered based on the applicant’s score on a number of parameters.

For a successful application, you are then required to provide some documents. This may include Identification (ID), sale agreement or offer letter, and valuation report.

The financer will then make an offer to you stipulating the terms and condition of the mortgage.

Once you accept the offer, the lender moves to the perfection of the instruments of the mortgage. The lender will require the seller of the property to release original certificate of title and any other relevant documents.

The lender is now able to register a charge, which is a mean by which the lender is able to enforce their rights to the property.

Finally, after successfully registering the charge, the lender can now pay directly to the seller of the property or to the borrower depending on the terms of the contract.

The whole process of getting a mortgage can take anywhere from 3 months to 6 months depending on the lender.

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