Back in the days, buying a house without a deposit was just impossible. You had to save up to 20% of the initial house price to be financed by a mortgage institution. To make matters worse, other development institutions also used to request a 20% down payment or even more, and they were very few. No bank could ever provide 100% mortgage. In some cases, you had to save the whole amount to own that dream house.
But from 2018, things got a different turn. Since then, you can buy your dream home with no deposit. Mortgage institutions have now introduced a 100% mortgage and even some offer up to 105%.
This means they are now offering 100% financing when buying a property or constructing a house, while the extra 5% is the closing costs, which include legal fees, stamp duty, and valuation.
Nice deal, right?
Besides, you can acquire furniture financing if you do not have furniture for your new home.
Do any banks in Kenya still offer 100% mortgages?
Yes, several banks in Kenya offer 100% mortgage financing, allowing you to purchase a home without a deposit. Here are some options to consider:
- Stanbic Bank Kenya: Offers up to 105% mortgage financing, enabling you to cover the full cost of a property, including additional expenses.
- Equity Bank Kenya: Provides up to 100% financing for purchasing complete house units or constructing homes for residential or commercial purposes.
- Co-operative Bank of Kenya: Offers up to 100% financing for properties under purchase, with a maximum loan period of 15 years.
- KCB Bank Kenya: Provides up to 90% financing for owner-occupied properties, with loan amounts up to KES 100 million.
- Absa Bank Kenya: Offers up to 90% financing with a repayment period of up to 25 years.
Please note that the availability of 100% financing may vary based on the bank’s policies and your financial profile. It’s advisable to contact the banks directly or visit their websites for the most current information and to understand the specific terms and conditions associated with these mortgage products. Even though this is a great deal that is helping many individuals to own their dream home faster than before, you also need to research well on the best rates available. With proper planning and adequate knowledge, you can get a good package and be able to pay back within a short time. Besides, if the rent of your apartment is on the higher side, you are better off taking a mortgage.
How does a 100% mortgage work once I’m approved?
Once approved for a 100% mortgage, the bank or lender will provide the full amount needed to purchase the property, meaning you won’t need to make a down payment. You will then repay the loan, including interest, over an agreed-upon period—typically between 15 to 30 years. The property will serve as collateral, meaning the lender can seize the property if you fail to make payments. Be sure to understand the interest rates, loan terms, and any additional fees involved before committing.
What is the maximum amount I can borrow with a no-deposit mortgage?
The maximum amount you can borrow with a no-deposit mortgage in Kenya depends on the bank’s policies, your income, and creditworthiness. Generally, banks offer up to 100% financing, meaning you could borrow the full amount needed to purchase a home. However, the loan amount can vary based on your ability to repay and the property’s value. Some banks may have limits, such as up to KES 100 million, while others offer financing for properties worth less. It’s best to check directly with the bank for specific loan limits and eligibility criteria.
What kinds of homes can you purchase with a 100% mortgage?
With a 100% mortgage, you can purchase various types of homes, depending on the lender’s terms. These may include:
- Newly Built Homes – Properties in new developments approved by the bank.
- Apartments & Condos – Residential units in high-rise or gated communities.
- Standalone Houses – Detached homes in urban or suburban areas.
- Townhouses – Multi-level homes in shared communities.
- Affordable Housing Units – Homes under government or private affordable housing schemes.
Advantages of 100% mortgage
- No Deposit Required: You can buy a home without saving for a down payment.
- Faster Homeownership: Get on the property ladder sooner without waiting to save.
- Ideal for First-Time Buyers: Helps a lot if you are struggling to save a deposit.
- More Cash for Other Expenses: Frees up money for moving costs, renovations, or furnishing.
- Potential for Property Value Growth: If the home’s value increases, you build equity faster.
- Encourages Homeownership: Makes buying a home more accessible for qualified buyers.
Disadvantages of 100% mortgage
- Higher Interest Rates: Lenders charge more due to increased risk.
- Negative Equity Risk: If property values drop, you could owe more than your home is worth.
- Strict Eligibility Criteria: Requires a strong credit score and stable income.
- Higher Monthly Payments: Borrowing the full amount leads to larger repayments.
- Limited Lender Options: Few banks offer 100% mortgages, reducing your choices.
- Additional Fees: Some lenders require mortgage insurance or higher processing fees.
What other options are available besides a 100% mortgage?
While a 100% mortgage allows you to buy a home without a deposit, it’s not always available or the best option for everyone. Fortunately, there are other ways to finance your home purchase in Kenya.
If a 100% mortgage isn’t an option for you, here are other best options available:
- Low-Deposit Mortgages: Some Kenyan banks offer 90% or 95% financing, requiring a small down payment.
- Government Housing Schemes: Programs like the Affordable Housing Initiative provide low-cost home financing.
- Joint Mortgages: Buy a home with a spouse, family member, or friend to share costs and qualify for better terms.
- Guarantor Mortgages: A family member guarantees your loan, helping you secure financing with better rates.
- SACCO & Microfinance Loans: Many SACCOs and microfinance institutions offer home loans with flexible terms.
- Personal Savings & Investments: Build savings through SACCOs, fixed deposit accounts, or investment plans to fund your deposit.
Your Credit Score Influences The 100% Mortgage Offer You Receive
Yes, your credit score affects the mortgage offer you receive. A higher credit score can help you secure better terms, such as lower interest rates and higher loan amounts. On the other hand, a low credit score may result in higher interest rates, stricter conditions, or even loan rejection. Lenders use your credit history to assess your repayment ability and risk level, so maintaining a good score improves your chances of getting favorable mortgage terms.
Take Away
Owning a home is gradually becoming easier, and this is one of many available options in the market at the moment. You no longer need to have a deposit to own that dream home. You can get the ball rolling with 100% financing from your chosen institution with the best rates.
FAQs
How does a 100% mortgage work?
A 100% mortgage allows you to borrow the full amount needed to purchase a property, meaning you don’t need to make a down payment. The lender provides the entire loan amount, typically with interest, which you repay over a set period. The property serves as collateral, so if you fail to repay the loan, the lender can repossess it. The terms, such as interest rates and repayment period, depend on the lender’s criteria and your financial situation. This type of mortgage is typically available for buyers with strong credit histories and stable incomes.
How do you calculate a mortgage payment?
You need the loan amount, interest rate, and loan term to calculate a mortgage payment. The formula involves multiplying the loan amount by the monthly interest rate and applying it to the total payments over the loan’s term. Essentially, the payment is determined by dividing the loan balance into equal monthly payments that cover both principal and interest.
What is the maximum years to pay for a mortgage?
The maximum years to repay a mortgage typically ranges from 25 to 30 years, depending on the lender and your financial situation. Some lenders may offer shorter or longer terms, but 30 years is common for many homebuyers. Longer repayment periods can reduce monthly payments but may result in paying more interest over the life of the loan.
How much mortgage can one qualify for in Kenya?
Your monthly mortgage payment should not exceed 40% of your net monthly income. Knowing this limit will guide you in focusing your property search on homes within your budget, even before applying for a loan. Affordable home loans can start as low as Kshs. Four thousand per month for each million borrowed.
How much do you need for a down payment on a mortgage in Kenya?
The down payment for a mortgage typically ranges from 10% to 30% of the property’s value, depending on the lender and the type of loan. Some banks may offer lower down payment options, but they often come with higher interest rates or stricter eligibility criteria. It’s advisable to check with different lenders to understand their specific down payment requirements.