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Critical Considerations for Mortgage Readiness:
#1: Is a mortgage a good fit for you?
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Critical Considerations for Mortgage Readiness:
# 2: Can you weather the rough and tumble of the economy?
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Critical Considerations for Mortgage Readiness:
# 3: Do you have what it takes financially to muster the commitment?
h2>Critical Considerations for Mortgage Readiness:
# 4: Do you have an Exit Strategy?
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Critical Considerations for Mortgage Readiness:
# 5: What are your alternatives and do they make more sense?
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So, should you take out a mortgage?
A mortgage is one of the most monumental financial commitments one may ever take on and requires the borrower to take into account some critical considerations for mortgage readiness. Over the course of tenure of your mortgage, you will be exposed to the ravages of economic instability, inflation, high interest rates and the consequences if you default.
To succeed, you may have to adjust spending habits, vigorously evaluate your financial health and live under the threat of economic vagaries that could topple your house of cards all while praying that your financial stability doesn’t teeter under the weight of anything earth-shattering like job loss or ill health. Here are a few of the critical questions you need to determine whether you’re truly ready for the financial weight of a mortgage, or if your alternatives make more sense before taking the plunge.

#1: Is a mortgage a good fit for you?
Most properties financed through mortgages cater to middle- and upper-income earners. Even with the introduction of “affordable housing” programs, family homes carrying a price tag of Kshs. 3.5 million aren’t within reach of the majority.
A Best-Case Scenario: Acquiring a 3-Bedroom Unit under the Housing Program at Kshs. 3.5 Million
Let’s consider a scenario where you, prospective home buyer with two (possibly three) children wishes to buy the “most affordable” housing” unit out there at a cost of Kshs. 3.5 million.
At a minimum, you need to have savings of at least Kshs. 350,000 (10%) to cover the closing costs and incidentals (stamp duty, valuation, processing fees, insurance et al), and at least double that amount if your lender requires you to pay a 10% deposit.
If your bank or SACCO is one of the partner institutions of the Kenya Mortgage Refinancing Company (KMRC) and you qualify, you may then secure a mortgage at rates as low as 9.5% with a term of up to 25 years. Even after applying a debt-to-income ratio of 40% against your take home pay (net salary), you will still need to factor in taxes and statutory deductions – approximately 45% of your pay.
All things considered, here is the outcome:
- Savings for Deposit and Closing Costs: 700,000 to Kshs. 1,050,000
- Loan Amount: 2,800,000 to Kshs. 3,150,000
- Tenure: 25 years
- Debt-to-income-ratio (DTI: 40%
- Monthly Repayment: 24,465 (20% deposit) and Kshs. 27,525 (10% deposit)
- Net Monthly Pay: 65,200 (20% deposit) and Kshs. 68,800 (10% deposit)
- Gross Monthly Income: 136,000 (if you paid 20% deposit) and Kshs. 153,000 (if you paid 10% deposit)
For the “average” Kenyan, whose income may hover below KES 50,000 monthly, even KMRC mortgages may not be unattainable.
High-income earners with stable, well-paying jobs or diversified income streams are better positioned to risk a mortgage. Established business owners with consistent cash flow and substantial savings could leverage mortgages to finance additional acquisitions while maintaining liquidity for other ventures. Kenyans in the diaspora often have higher incomes and may access lower interest rates abroad. They may consider a mortgage in Kenya to invest locally while maintaining financial flexibility abroad.
Mortgages ultimately make more sense when approached as part of a well-thought-out investment plan—like pooling resources with family or friends to acquire income-generating properties.
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# 2: Can you weather the rough and tumble of the economy?
Frequent economic shocks—rising inflation, currency depreciation, and high unemployment—make the sustainability of long-term commitment to a mortgage incredibly challenging. Mortgage rates often oscillate over their term making repayments variable and unpredictable.
The weighted average lending interest rates, for example, in 2004 averaged about 12.5%. Had you borrowed 10 million with a 15-year mortgage tenure in 2004, your monthly repayment would have ballooned to Kshs. 193,000 per month (from Kshs.132,000) in 2013 when the rate peaked to 19.65%. If your monthly income remained fairly constant and inflationary pressures held you down, then your risk of default would have become all too real. Lending rates (traditionally ranging at 12-16%), can unravel your plan and push your repayments to daunting levels.
Unforeseen economic disruptions (like Covid 19, drought and other vagaries) destabilize incomes and compound inflationary pressures. In 2024, an unpredictable and incoherent tax regime, depreciating currency, rising interest rates and high inflationary pressures exacerbated by political and economic uncertainty have dampened the market, eroding financial resilience all around.

# 3: Do you have what it takes financially to muster the commitment?
Many Kenyans live paycheck to paycheck, leaving little room for the financial resilience required for home loan repayments. The “average” Kenyan, even those occupying enviable corporate positions are exposed to risks like job loss or health emergencies, which could derail their ability to service a mortgage. Default can lead to foreclosure, potentially wiping out any accumulated equity.
Do you have any risk mitigations to help you absorb these shocks, build financial resilience and cushion you from the risk of default?

# 4: Do you have an Exit Strategy?
A desirable acquisition isn’t just one that is “affordable”. In markets filled with uncertainty, a desirable acquisition may also be one that can be quickly liquidated.
When taking a mortgage, you cannot account for all the variables that could fail. And while “failure” isn’t something many people plan for, ignoring it isn’t entirely financially responsible.
If you plan for the possibility that things could go south or that you may have a change of heart down the road, a robust plan to counter that possibility ensures that you are better prepared to make necessary changes, adjust and adapt. Rigidity and sentimentalism around acquisitions may blind you from seeing a way out of a decision which may have been good when you made it but has now put you in a strangling chokehold. Holding the thinking that you may never be compelled by the unforeseen or the desirable to make a change the plan makes it hard to accommodate necessary change.
Think of an exit plan as an off-ramp – you get to shift course without losing the ultimate focus of the destination. It requires level-headedness and emotional detachment – a willingness to look at what may be possible beyond your decision to take the mortgage.
The best exit plans don’t just help you anticipate when change is necessary but also help you identify the action(s) required. It also allows you to see opportunities either when confronted with a hard choice (risk of default) or because you are actively observing your environment so that you willingly embrace any changes needed. Over the tenure of a mortgage, your paradigms may shift, as will the markets. Life-changing events (death, relocation etc.) may have happened so revising your earlier decision(s) is necessary.
You can choose to cash out and invest your equity in a property that makes more sense to you, rather than face the indignity of going through foreclosure. A graceful exit may even allow you to keep more of your equity. Do not be beheld to that which cannot behold you.

# 5: What are your alternatives and do they make more sense?
Would renting, or buying land whilst saving towards the goal of homeownership make more sense? Forget the pseudo-importance and perceived relevance you somehow acquire by carrying the tag “homeowner” – only you have to live your life, its conveniences and inconveniences. Are there alternatives (like rent-to-own, off-plan schemes or even negotiated settlements) that offer a more sustainable path to homeownership for YOU?
Is the option of joining a homeownership savings plan or SACCO to network with other prospective homeowners and leverage better terms from lenders at your disposal?
Even with the decision to mortgage, would Lender X be preferential to Lender Y? Can you sell your mortgage to Lender Y and ditch Lender X to benefit from better terms (say a reduction in interest rate and repayments)?
None of these options comes without its pros and cons.
Critical Considerations for Mortgage Readiness: So, should you take out a mortgage?
All things considered, the pertinent question isn’t so much if you should as much as whether it is a good fit for YOU. That answer isn’t universal.
If you have the financial wherewithal (awareness, preparedness, courage and discipline) to manage a mortgage, go for it. Taking a mortgage is a decision that binds your life inextricably to your financier. Are you prepared to weather the financial storms that may come? Do you have an exit plan?
Every good thing worth achieving, every big dream, every great human endeavour and enterprise is almost always achieved against the tyranny of risk. Look before you leap, but don’t sit on the decision too long. As always, consult with professionals can help you navigate the decision.
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