Many aspire to own a house, but not many can put together millions of shillings required as payment. Through mortgage financing, owning a home has become manageable, cost-effective and affordable. It is, however, a big commitment — one that you will be in for 10, 15 or even 30 years. This may seem a daunting a task but with some research and the right lender, the process can be fairly smooth and one that you as the borrower can actively participate in and control.
There are many players in the mortgage market, most of whom offer similar products at more or less the same prices. A smart way to choose a mortgage lender would be to look at who offers not only the best rates but also the most convenience in the process.
Before one goes out looking for a property to buy, it is advisable to visit your intended financier and have them evaluate your finances and assess exactly how much you would actually qualify for. This will typically entail the following aspects that relate to your current financial status as well as your financial history.
Once you know how much you are qualified for, you can start looking for a property worth the said amount. Some banks have a list of property developers that they partner with, which is to be a good place to start.
Sale agreement
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A sale agreement is a written contract between a seller and a buyer for the purchase and sale of a particular property.
It is imperative that you do your due diligence on the property you have chosen before entering into a sale agreement. Have your lawyer do a search with the property registrar in your jurisdiction confirming that there are no encumbrances on the property that would prevent its sale.
Valuation process
Sometimes referred to as the appraisal process, property valuation is the process of estimating the value of a piece of real estate. The valuer will be looking at factors such as location, amenities, structural condition of the property and sale of similar properties within the same location.
This process ensures that the price quoted by the seller is the actual value of the property.
Conveyancing process
Once the valuation report is in and everything checks out, the bank’s lawyer issues an undertaking to the seller’s lawyer stating that all things remaining constant, the money will be released to the seller within 14 days after the successful registration of the property. The latter then releases the title to the bank’s lawyer in the borrower’s name.
The borrower will be required to pay a stamp duty on transfer — four per cent for major cities and two per cent for upcountry and a stamp duty charge of 0.1 per cent of the loan amount. The documents are kept by the bank to be released to the borrower once the mortgage has been fully serviced. On disbursement of the loan, the borrower will be required to take property insurance and mortgage protection insurance will be paid on an annual basis.
The whole process of taking out a mortgage ideally takes about 90 days.
— The writer is the Barclays Bank head of mortgages
