15th December 2011
The Mortgages Manager
DebtFund Group
Mortgage Street
Dear Manager,
RE: Increase in interest rate
My family and I would first like to thank you very much for giving us the opportunity to own our home for the past 5 years, it has been a rewarding experience and if it was not for your organization we would never have had this privilege.
It is therefore with a heavy heart that we write you this letter in response to your belated interest rate increase notice which is dated one month after the effective date of the change.
When we took out the mortgage for our home you advised us that it was better to take the variable rate option as the interest was 2% lower than if we had opted for the 5 year fixed rate.
In addition you advised us that it was best if we picked the loan jointly, together with my spouse, as our joined incomes would increase the mortgage amount we would qualify for, advice we now realize, we foolishly accepted.
3 months ago my spouse was retrenched by the former employer but has fortunately been able to get another job; the new job pays 40% less than the one previously held.
As a result of this my salary has had to bare the additional loan repayment contribution which leaves us with 40% less in income available for other issues such as school fees and vehicle maintenance.
We have developed a tradition of going to Mombasa every Christmas, due to the reduced income from my spouse we had decided to reduce our stay from the usual 1 week to 4 days, but with the new interest rate we have been forced to cancel the trip entirely.
We listened to your advice as we believed that you where the professional in this instance and that you had our best interests at heart, we know realize that to you it was a target issue.
Let me get to the main point of this correspondence before I get too detracted by the emotions welling up inside me from the situation in which I find my family and me.
The increase in the mortgage rate, that was effected on the 28th of October 2011 and notified to us on the 15th of November 2011, indicates that of this writing we are already 2 months in arrears meaning that recovery action a.k.a. auction is likely to be initiated at the beginning of next year.
The change in interest rate from 13.5% to 19% means that our repayment on our loan of 8 million will increase from the previous 104,000/- per month to 134,000/-, an increase of 30,000/- per month or a 28.8% increase.
You have recently indicated that we can increase the loan period to 20 years from the current 15 years to ease the effects of the increase in the interest rate. With the longer repayment period the repayment increases from the current 104,000/- to 129,000/- a 25,655/- increase.
I enquired if it can be increased to 25 years; I was told that due to my age, 40, 20 years is the maximum possible as the banks terms are that mortgage can not extend beyond my statutory retirement age as it is secured by my payslip.
With the statement from the Kenya Bankers Association earlier in the week we hope that you will be able to both extend the repayment period and reschedule the balance of the loan. If this is done the increase in repayment will only increase by 11,000/- an amount we should be able to absorb by adjusting our standard of living.
If the option to extend the repayment period and reschedule the balance of the loan we might not be able to continue to service the mortgage.
With the current increase in the cost of living and the fact that we are unlikely to have a salary increase in the coming year we shall be left with very few options.
To reduce the trauma and social embarrassment we had considered selling the house at the current valuation price of 15 million and then requesting the new owner to rent us the house at the prevailing market rent in the area of 65,000/-.
Unfortunately with the even higher interest rates for new loans we do not expect much success in this as with a repayment of 193,000/- per month it is unlikely that someone would accept our offer.
Your prompt and urgent response to our plea will be highly appreciated by my family and me.
Regards
Indebted
I came across this interesting post on a local site and thought it might be relevant to those of us with mortgages.
If only the middle class in Kenya could unify to stop some of the excesses of this government that keeps pushing us to the wall.
"Uploaded from quadrantshift-africa"