Property Finance for Kenyans abroad by Housing Finance

Housing Finance has for over 40 years helped Kenyans in Kenya and beyond turn their dreams into homes. The company was incorporated on 8th November 1965 as per the Banking Act, under the name the Housing Finance Company of Kenya

It has since been the premier mortgage finance institution by providing easy access to mortgage finance, by enabling our clients to access money as they build, buy and own their homes.

SOLUTIONS FOR YOUR EVERY NEED.

Housing Finance has developed a variety of products to suit your every need – we can provide you financing to buy an already completed house, build your home, purchase a plot or even build residential units. Our mortgages are offered at very attractive interest rates. We usually finance up to 85% the value of the property of choice for a maximum period of 15 years.

The most popular products are:

1. Investment Residential Mortgage – This loan facility is suitable for individuals who would like to buy property for investment purposes i.e. to earn rental income.
2. Vuna Hela Mortgage – This product is ideal for those who would like to borrow funds against a property they already own. Through regular repayments, one acquires equity in their mortgage equivalent to the amount already paid up. This acquired equity can be availed for further development of the property, or for other purposes. Money is lent on the value of the equity.
3. Plot Purchase Financing - This loan helps satisfy the aspirations of many Kenyans by providing access to funds that will contribute toward the purchase of a plot.
4. Construction Financing - This is a facility that allows those who already own a plot to borrow and build a residential unit on it.

 Innovation does not stop there; aspiring to take property ownership to new heights, Housing Finance has created new and unique products that are designed to provide convenience and match the changing customer’s needs;

These include:

Makao - Makao is a convenient building solution that aims to help home owners build a home cost-effectively by bringing together a consortium of professionals in the construction industry.

In this unique product, one is able to access qualified personnel to supervise the construction thus making the building process friendly and seamless.

A variety of house designs have been developed for home owners to choose from depending on their requirements and financial ability.

Project Finance

This is a specialized solution designed to cater for both small and large property developers who wish to put up multiple units either as build to rent or build to sell. Financing is normally based on the anticipated cash inflows or income of the property being developed.

We also have savings products to cater for those who would like to save some money back home. These accounts offer attractive interest rates and can be used to put aside money to raise the required minimum.

These include:

• Crossover Savings Account – This is a Super Savings account that not only earns you high interest on your money but also earns you points based on the deposits made into the account. These points can be redeemed for great household good. The account also gives you access to 100 per cent mortgage financing, up to 25 per cent discount on commitment fees, up to 2 per cent discount on mortgage interest when applying for a mortgage loan and much more.
• Treasure Account – This is a children’s account with no charges that allows guardians to put money away with the aim of giving their children a good start to life.
• Housing Development Bond – The HDB is an account that allows a fixed amount of money to be saved for a period of time. The account holder declares the amount to be saved as a lump sum and fixed for an agreed period.  It is designed for the individual saver who will not need to access the funds for the duration of the savings plan.

The Mortgage Process:

Mortgage acquisition is a very engaging process involving various stakeholders in the property market such as the Ministry of Lands, Lawyers, Valuers, and Quantity Surveyors etc.

The first step towards taking a mortgage is an appraisal carried out by a team of experts at HF once identification and income documents are availed. Upon review and approval by the Housing Finance team, the external stakeholders are then charged with the responsibility of ensuring that the right transfer of documents has been done. This process can take a maximum period of 3 months.

For more information on mortgage solutions, please send us an email on diaspora@housing.co.ke or visit our website www.housing.co.ke.

No matter your needs, Don’t let your home away from HOME be a factor to you not investing in your motherland.

Diaspora frequently asked questions on Mortgages

What mortgage products do I qualify for while in abroad?

At Housing Finance we have products for non-resident Kenyans or foreigners who would like to enjoy the banking services and products provided in Kenya.

We have a wide range of mortgage products available to you. These include property (plot, apartments, and houses) purchase, construction of residential and commercial houses and much more.
We can finance up to 85% the price of the property.

If I have already changed citizenship, do I qualify for a mortgage?

Yes you do. Under the new Kenyan constitution, dual citizenship is allowed.

As long as you have a valid Kenyan passport and a valid foreign passport you can apply for a mortgage.

Can I start saving for a mortgage while abroad?

Yes. There are savings accounts targeting those who would like to save towards owning a home. Such accounts include but are not limited to the following:

The Crossover Savings Account is an account that offers you very attractive features that enable you to save for long term projects such as home ownership or any other dreams you have in mind.  These features include earning high interests on the deposit made to the account, earn loyalty points on every deposit made into the account, access to 100% mortgage financing, up to 25% discount on commitment fees, up to 2% discount on mortgage interest when applying for a mortgage loan and much  more.

The Housing Development Bond (HDB) on the other hand is also good for those who want to set aside money for putting up a home. The HDB requires a minimum of Kshs 50,000 and offers a saving of 5% on withholding tax. HDB gives you the flexibility of savings and withdrawal in case there is an urgent need for the money.

What is the process of applying for a mortgage?

The first step towards applying for a mortgage is to provide your income details to us i.e. net income, living expenses, rental income (if any).  We will appraise you and advice on the loan amount you would qualify for. This will enable you to budget and look for a property that you can comfortably pay for.

Once you have identified a property, you will need to submit your full application to us for approval. On approval, we will give you an offer letter which you need to accept by signing and return to us.

How do I construct when away?

This can be done in two ways; Makao and through our construction product.

Makao is a product that offers a one stop solution for people who aspire to construct residential properties without going through the hassles of construction. There are pre-designed house types to choose from depending on your wallet size. All you need to do is provide your income documentation for pre-appraisal and sign up for the prototype of choice. The house will be delivered on your plot complete with keys and a house manual after a pre-determined period.

Alternatively, you can choose a team of professionals to carry out your construction. HF has an in-house team to vet and oversee the project to ensure the construction is done to detail. The funds are disbursed in stages after thorough site inspections are done.

As a developer in the Diaspora, how would HF assist me?

HF would finance you in developing the project under our construction product(s).

We would also market and sell the houses through our Property Point and finally provide mortgage to the end buyers of the project.

  

I work for an international organization on contract. Is it possible for me to still qualify for a mortgage?

Yes. When considering your application, we would look at several factors such as the stability of the organization, your profession within the organization, duration you have worked with the organization and number of renewed contracts.

We also consider your other sources of income e.g. rental income in Kenya and spouses income.

How do I get more information?

Visit our website Diaspora section www.housing.co.ke or write to us on propertypoint@housing.co.ke or diaspora@housing.co.ke or call us on 3262000/ 3262364/ 3262389

Why Insurance is a critical aspect of your mortgage

A mortgage on a home is one of the largest debts most Kenyans incur, and indeed needs to be taken seriously.

Mortgage holders need to take steps to protect their family home in the event that payments cannot be met due to death, illness or disability.

Mortgage insurance is today a compulsory financial agreement that insures the lender against loss in case the borrower fails to pay his or her mortgage. The borrower normally pays for this insurance. 

An initial premium will be collected during the closing of a mortgage deal and depending on the chosen premium plan; a monthly payment may be included in the payment of the house made to the mortgage lender. 

 

The mortgage lender then remits the payment to the insurance firm.  The cost tends to vary depending on the size of the down payment of the home loan.

This type of insurance is beneficial to a homebuyer since it allows them to become homeowners sooner and tremendously increases their buying capacity. 

Introduction of mortgage insurance has ensured that lenders keep the down payment for the purchase price of a home low, which means you will take a shorter time to save for your dream home.

Mortgage insurance has given lenders the necessary comfort to offer bigger loans to individuals. Lending money for mortgages is today less riskier for most banks and for mortgage meaning lower and more stable interest rates. For the borrower, taking mortgage insurance will ensure the mortgage will be paid off in full, in the event of the homeowner's demise or permanent disability. 

 This kind of insurance also plays an important role in home ownership. Without mortgage insurance, many will not be able to qualify for a loan to acquire a home.

While some view it as an extra burden on the homeowner costly, it is a means of securing a mortgage and getting you closer to the home of your dreams.

Without paying the mortgage insurance, home owners will find it difficult to purchase a home or utilize their home equity. So, what a borrower may consider as a disadvantage is actually the approval factor for their loans.

Furthermore, the insurance covers your mortgage payments as the borrower in case you are unable to pay for your monthly mortgage due to illness, injury or long-term unemployment. Mortgage insurance also has the added benefit of protecting your investment as well.

It is recommended that home owners also take insurance policies that cover structures on a property, including homes and out buildings, as well as personal items, such as furniture, electronics and clothing. Homeowners insurance pays for damages and loss caused by fire, weather among other perils.

Mortgage insurance has helped overcome traditional barriers to financing. More and more homebuyers who may not have qualified for a mortgage are benefiting from mortgage insurance for example, those who are self-employed or with seasonal incomes.

With mortgage insurance, people who have maintained a good credit but might not meet conventional lending criteria can qualify for the financing they need.

Disclosure of underlying health conditions is important when applying for coverage as benefits may be denied if full disclosure was not made. However today you can take a mortgage without taking a medical examination as a result of mortgage insurance – although limited to Kshs 12.5 million in the case of Housing Finance.

Mortgage insurance protects the homeowner who suffers a severe illness that is covered under the policy such as life threatening cancers, HIV, heart attack, stroke and kidney failure.

Mortgage insurance provides peace of mind for you, knowing that your family lifestyle can continue without additional difficulties. 

By David Maveke, General Manager - Mortgage Finance at Housing Finance

How to improve your chances of qualifying for a mortgage

Before any mortgage lender can grant you a loan to purchase your dream home, they would like to make first sure you have the ability to repay. 

Your finances will be scrutinized carefully, many questions are asked and plenty of papers to fill out and sign before you know if the house you have your eye on, can be yours.

Lenders will need to consider your personal finances very carefully before making a decision. Your ability to qualify for a mortgage loan will depend on capacity to repay the debt; it depends on your earnings and employment history, expenses, number of dependents, and other obligations you have.

The amount of cash you have for a down payment and settlement costs, as well as cash reserves to deal with expenses that may arise after you're in the home will also be considered in the application stage.

Finally, the mortgage firm will require a down payment   the mortgage which varies from one lender to another.

Also considered is your Credit history - how much you owe, how often you borrow, if you pay your bills on time, and if you're living within your means.

The licensing of Credit Reference Bureaus is expected to improve the speed of risk assessment and ultimately lead to reduced lending and administrative costs. Maintaining a good credit history will go a long way in enabling you to qualify for a mortgage.

Most lenders want to know your monthly expenses and savings culture to confirm if indeed you have the discipline to commit comfortably a mortgage.

For many Kenyans the journey to home ownership is mainly halted by the inability to raise enough capital to kick start the mortgage process.

The government and private sector has responded to this need by introducing a host of new incentives aimed at making home ownership easier for the ordinary Kenyan.

The risk profile of the mortgage industry is changing in response to the demand created through customer preference.

The modern mortgage market has become more creative, and therefore this has led to an increase in the choice and diversity of mortgage packages being offered to borrowers.

By investing in a pension scheme for example, you are increasing your chance of qualifying for a mortgage. The government has today allowed customer to assign up to 60% of their accrued retirement benefits to acquire the home of their dream.

Housing Finance, for example, has introduced solutions that not only allow the client to get financing for their home using their pension, but also cater for the upfront mortgage payments such as the down payment, stamp duty, valuation and legal fees, which are often stumbling blocks to home ownership.

Another major challenge facing most home owners is the ability to have enough income to support the monthly mortgage obligations.

This challenge has been partially addressed through new solutions that allow mortgage financiers to consider supplementary income in the qualification stage.

Today Housing Finance is addressing the needs of those currently in business or planning to change from a full time career to running their own business.

The journey to homeownership starts with financial discipline. By opening a Home ownership Savings Account, you not only enjoy tax benefits as you save for your first home, but it also enables the mortgage firm to better understand your finances, which eases your mortgage application process.

By taking advantage of existing incentives and cultivating a good savings and spending culture, it will be possible to own your dream home sooner than later.

Flexible Mortgage plans now reflecting changing lifestyle

Flexible mortgages are among some of the new mortgage packages that have been created to cater for the modern day mortgage market.

Today’s mortgage market has become more exciting and therefore this has led to an increase in variety and diversity of mortgage packages being offered to borrowers.

Essentially, a flexible mortgage is paid back in varying amounts. By way of example, borrowers whose income includes a significant but seasonal income might make use of seasonal payments to make overpayments, thereby reducing the term.

Housing Finance has introduced a cyclical mortgage product which is flexible to individual circumstances.

This is especially useful for self employed borrowers and those with a variable income since they are not penalized for additional capital repayments or if payments are not made monthly.

With its all-in-one design, this product can save clients a significant amount of interest while it speeds their debt reduction.

Plus, since it frees up money on a monthly basis by helping clients to smooth out monthly cash flow and lower their debt costs significantly, it can help clients to increase their investment activities.

Flexible mortgages are particularly suited to today’s lifestyle, where jobs for life are virtually unknown, and suite those either in business or plan to change from a full time career to run personal business.

Housing Finance’s Cyclical mortgage product offers flexible repayment terms to match a customers’ business' cash flow, either on quarterly, semi-annual or annual repayment.

The Cyclical Mortgage and Makao, a product for home builders, present vastly different risk profiles, requiring risk management skills that do not naturally emerge from disciplines and training associated with traditional mortgages.

The Makao concept was recently introduced to provide potential home owners with a one-stop solution. Housing Finance in conjunction with a consortium of professionals in the building process are managing the whole process on behalf of the prospective owner.

The risk profile of the mortgage industry is changing in response to the demand created through customer preference.

Customers are demonstrating more than ever their increasing expectations of personal service and a mutually beneficial relationship with their financial institutions.

In addition to the traditional community value of home ownership, these trends mean that mortgage lending has multiple roles across the distinct phases of customer life styles that give rise to key product opportunities.

The risk profile of the mortgage industry is changing in response to the demand created through customer preference.

Housing Finance and EADB to co-finance housing projects

Housing Finance has signed an agreement with East African Development Bank (EADB) to jointly co-finance large scale projects.
Mr. Ireri said the firm will continue to seek partnership arrangements and opportunities with financial institutions as part of its mandate to mobilize additional resources for housing development.

“We have adopted the strategy of co-financing projects so as to raise the finance necessary to undertake sizeable commercial and housing projects,” Mr. Ireri said. 
He said the highly successful Bond issue that raised Kshs 7 billion has increased Housing Finance participation and capacity in mortgage lending and housing supply. 
The company, he adds, is appraising various large scale housing projects that have capital investment requirements of up to Kshs 1.5 billion.

“Gaining access to alternative sources of funding at competitive rates signals a new dawn in Housing Finance ability to attract and access long term financing,” said Mr. Ireri
EADB Director General, Ms. Vivienne Apopo said the firms will also collaborate in the area of research and in the mobilization of financial resources including the mobilization of domestic financial resources to support projects.
“East African Development Bank has adequate resources to support financing of housing in an integrated approach. We welcome initiatives to explore new financial options, including co-financing,” said Ms. Apopo.
Ms. Apopo said the bank will spearhead the establishment of a regional institution with adequate capacity to promote housing development.

“The institution would be dedicated to promoting the development of housing and housing finance in East Africa,” said Ms. Apopo.
Housing Finance, Property Finance activities span across a range of property types including residential, office space, retail shopping centers, industrial usage, hospitality and educational use.
Under a fully fledged Project Finance department comprising a mix of technical, financial and market knowledge capability, Housing Finance is spearheading concept origination, financial and technical structuring and financing of property acquisition, development and improvement across wide sectors of residential, commercial and industrial use.

Housing Finance has successfully positioned itself as the main player in the property value chain under an ambitious Property Supply Strategy.
The mortgage firm in 2010 signed a co-financing agreement with Shelter-Afrique, a regional housing finance and development institution involved in financing housing and related infrastructure development in Africa.

EABD is a regional premier development financing institution whose main objective is to provide financial assistance to promote socio-economic development of the Member States of Uganda, Kenya and Tanzania.
The Bank offers a mix of financial products and services to viable projects in the Member States. EADB mobilises local resources by issuing bonds. In cases where clients’ requirements go beyond EADB’s financing limits, the Bank can offer syndication and co-financing arrangements.

When is the best time to start planning for a mortgage?

The journey to property ownerships begins with putting funds aside as savings to achieve your long term goal of home ownership. This can be achieved by opening a 1st HOP Account, a Crossover Savings Account or through purchase of a Housing Development Bond. It is advisable to begin saving early for home purchase since mortgage is a long term commitment that requires self-discipline.

The 1st Hop account is an excellent starting point for young people who want to develop the savings discipline. It enables you to save up to Sh.4,000 per month tax free. Also, interest on the account for amounts below Sh.3,000,000 does not attract tax. The account’s key advantage is that it builds deposits and its benefits accrue when you invest in a housing project.

The Crossover Savings Account offers you very attractive features that enable you to save for long term projects such as home ownership or any other dreams you have.  These features include: earning high interest on the account deposits as well as loyalty points on every deposit, access to 100 per cent mortgage financing, up to 25 per cent discount on commitment fees, up to 2 per cent discount on mortgage interest when applying for a mortgage loan and much more.

The Housing Development Bond (HDB) on the other hand equally suits those who want to set aside money for putting up a home. The HDB requires a minimum of Sh.50,000 and offers a saving of 5 per cent on withholding tax. HDB gives you the flexibility of savings and withdrawal in case there is an urgent need for the money.

As your income grows, it is wise to put more money aside. The challenge with most of us is the culture of first spending then saving what remains.