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Is Taking a Mortgage the WORST Decision Ever??
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Rollout
#81 Posted : Wednesday, May 07, 2014 8:06:17 PM
Rank: Member

Joined: 4/26/2011
Posts: 759
I am neither an expert in NSE nor Kenya real estate but there are a few wrong assumptions people are making on this thread. To correct that, here is my knowledge:

1) Land do not appreciate indefinately neither is the property prices.

2) A mortgage doesn't give you ownership right to the property, the bank still hold the call opton, as a matter of fact, the bank is the investor with a floor, as the holder of the mortgage you're betting on the upside without any hedge.

3) Mortgage is never a good investment.
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sparkly
#82 Posted : Wednesday, May 07, 2014 8:07:50 PM
Rank: Elder

Joined: 9/23/2009
Posts: 8,083
Location: Enk are Nyirobi
I agree with @Maich. A 20yr mortgage at 15% is slavery. Better buy cash OR buy plot and build with Sacco loan. A 12% Sacco loan on reducing balance is 7.5% straight line.
Life is short. Live passionately.
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jawgey
#83 Posted : Wednesday, May 07, 2014 9:23:05 PM
Rank: Member

Joined: 1/13/2014
Posts: 398
Location: Denmark
deadpoet wrote:
knight026 wrote:
kiwaru wrote:
d'oh! I met a guy who told me that he bought half an acre in Kile at 1m in 1981.

Recently it was valued at 100m

#dothemath



Do the Maths.d'oh!


Adjusted for inflation? That 1m at that time is probably worth the same as 100m now.

true.. time value of money
Seeing is believing
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washiku
#84 Posted : Wednesday, May 07, 2014 9:37:15 PM
Rank: Chief

Joined: 5/9/2007
Posts: 13,095
@Maich n all, nice educative thread. Question, what advise would you give a guy with an access to 4million loan at an interest rate of 6‰? I now guess taking a mortgage at the same rate would be kinda dumb, just in case one shifts jobs as McReggae has explained earlier.
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MaichBlack
#85 Posted : Wednesday, May 07, 2014 9:46:47 PM
Rank: Elder

Joined: 7/22/2009
Posts: 7,910
Obi 1 Kanobi wrote:
knight026 wrote:
Big names,not all rosy, and the assumption that one will never make a mistake is a fallacy.

KQ-11.25(1996)
Kengen-11.90(2006)


Now we are getting somewhere with regards to this mythical 25% return over 20 years.

In addition to all the other links i have provided, see post# 937 in this thread
Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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MaichBlack
#86 Posted : Wednesday, May 07, 2014 9:59:26 PM
Rank: Elder

Joined: 7/22/2009
Posts: 7,910
washiku wrote:
@Maich n all, nice educative thread. Question, what advise would you give a guy with an access to 4million loan at an interest rate of 6‰? I now guess taking a mortgage at the same rate would be kinda dumb, just in case one shifts jobs as McReggae has explained earlier.

6% is a good deal in my opinion. If you have the opportunity, take the money.

Assuming a repayment period of 20 years, you will be paying Kshs. 28,657.24/= every month.

=PMT(6%/12,20*12,4000000,0,0)

That is just like paying rent but you end up owning the house!!!

Even if reduce the period to 15 years, you still end up paying Kshs. 33,754.00/= per month.

If you have a plot, with 4 million you can build yourself a nice cozy house and simply transfer you rent payments to loan repayment with no extra hustle!

NB: The main problem is current interest rates. At 6% [fixed I hope] you are getting a very sweet deal! Take it.
Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
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Mukiri
#87 Posted : Wednesday, May 07, 2014 11:06:59 PM
Rank: Elder

Joined: 7/11/2012
Posts: 5,222
MaichBlack wrote:
washiku wrote:
@Maich n all, nice educative thread. Question, what advise would you give a guy with an access to 4million loan at an interest rate of 6‰? I now guess taking a mortgage at the same rate would be kinda dumb, just in case one shifts jobs as McReggae has explained earlier.

6% is a good deal in my opinion. If you have the opportunity, take the money.

Assuming a repayment period of 20 years, you will be paying Kshs. 28,657.24/= every month.

=PMT(6%/12,20*12,4000000,0,0)

That is just like paying rent but you end up owning the house!!!

Even if reduce the period to 15 years, you still end up paying Kshs. 33,754.00/= per month.

If you have a plot, with 4 million you can build yourself a nice cozy house and simply transfer you rent payments to loan repayment with no extra hustle!

NB: The main problem is current interest rates. At 6% [fixed I hope] you are getting a very sweet deal! Take it.

Take the mortgage/land purchase etc loan.

If it get to @Mcdoba's scenario (Where I think the guy in question was not very bright), sell the house, pay the loan, and you are lest with a sizable capital to do something, accomodation-wise.

Proverbs 19:21
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Mukiri
#88 Posted : Wednesday, May 07, 2014 11:19:31 PM
Rank: Elder

Joined: 7/11/2012
Posts: 5,222
mungaits wrote:
Very informative discussions!

Just a thought, what if one was to accelerate repayment through lump sum payments and clear the mortgage in say 5yrs.

How does this affect the total amount paid?

Can we get real feedback from Wazuans with mortgages not "my friend" tales!

Asanteni

Did that. Took mortgage because I had access to low interest loans. And I was very young. Paid my mortgage haraka haraka with proceeds from other ventures.

There is something mentioned in this thread that you won't read often. Peace of mind.

There are 2 'peace-of-mind's in contention here. The one of living in your own place, on one side, and the one of not worrying about changes in interest rates/how to sustain mortgage payments.

Everyone is built differently. There is no one-size-fits-all.

Someone might even argue that there is no assurance of tomorrow. Why delay gratification, when I could die without enjoying options available to me? In any case, if I expire my mortgage is bound to be paid up by insurance and my family is taken care of.

Proverbs 19:21
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washiku
#89 Posted : Wednesday, May 07, 2014 11:27:00 PM
Rank: Chief

Joined: 5/9/2007
Posts: 13,095
Okay then... Now, one more... Two options, at the same rate of interest, what is a better option between taking an unsecured loan and building a house vis a vis taking a mortgage for an already built house?
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Rollout
#90 Posted : Wednesday, May 07, 2014 11:40:37 PM
Rank: Member

Joined: 4/26/2011
Posts: 759
Mukiri wrote:
mungaits wrote:
Very informative discussions!

Just a thought, what if one was to accelerate repayment through lump sum payments and clear the mortgage in say 5yrs.

How does this affect the total amount paid?

Can we get real feedback from Wazuans with mortgages not "my friend" tales!

Asanteni

Did that. Took mortgage because I had access to low interest loans. And I was very young. Paid my mortgage haraka haraka with proceeds from other ventures.

There is something mentioned in this thread that you won't read often. Peace of mind.

There are 2 'peace-of-mind's in contention here. The one of living in your own place, on one side, and the one of not worrying about changes in interest rates/how to sustain mortgage payments.

Everyone is built differently. There is no one-size-fits-all.

Someone might even argue that there is no assurance of tomorrow. Why delay gratification, when I could die without enjoying options available to me? In any case, if I expire my mortgage is bound to be paid up by insurance and my family is taken care of.


Morgage payments are structure such that large portion of you monthly payments in early live goes to paying interest; if you have a 20yr Mortgage at the 10th year mark you would have paid approx. 30% of the principle( Not 50%) and you'd have paid approx. 70% of your interest.

This structure is meant to discourage people from accelarating their payments.
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