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Is Taking a Mortgage the WORST Decision Ever??
Rank: Member Joined: 2/20/2007 Posts: 767
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vky wrote:good discussion here, taking a mortgage in Kenya is akin to institutionalized robbery albeit legally,
what i do for keep involves a whole lot of travel and being away from home for long periods of time hence when it came to housing what i needed most was flexibility and a mortgage would tie me down plus it was absolutely ridiculous to even think of taking one at the then rates plus the artificial nature of realty pricing didn't help.
i decided to buy upfront a two bed flat on MSA rd for 5.5m as it would fit perfectly within my plans but while i was consolidating my funds for the purchase i read something on wazua about putting cash in bonds and using interest to pay rent and that is what i exactly did, got some 6m bought a 15 year bond at 11% fixed which gives me about 45k monthly then rented out a unit at the said flat complex for 28k service charge included all this was captured in a lease renewable every 2yrs and payable bi annually to tally with my interest payments.
i easily pay rent, monthly shopping and utilities even when i am not around.
i dont have issues with renting and if i wanted to upgrade all i need to do is get another bond to cover the difference in rent that i would pay at the new estate, the only home that i will be interested in building is my retirement home which i will build in my bunduz after retiring with the cash from the bonds
Good thoughts Vky, however, have you considered that after 15yrs the money you get back from the bonds will have been eaten up in value due to inflation. In addtion, the interest payments are fixed while rent expense is bound to increase over time. With your strategy, I feel you would be better off just buying the flat and then rent it out if you have to. They must find it difficult....... those who have taken authority as the truth, rather than truth as the authority. -G. Massey.
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Rank: Elder Joined: 6/23/2009 Posts: 14,318 Location: nairobi
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a mortgage is a necessary evil. the trick is to ensure computation is on reducing balance and thereafter pay it down fast i.e incase monthly repay is set at 20K, place an extra 20K or more.. that way, you halve the time it takes to clear. its a fight that can be won. plus incase you die, your children shall not be left homeless as insurance shall settle outstanding balance in full.. COOP, IMH, KEGN, KQ, MTNU
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Rank: Member Joined: 6/17/2010 Posts: 572
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tom_boy wrote:vky wrote:good discussion here, taking a mortgage in Kenya is akin to institutionalized robbery albeit legally,
what i do for keep involves a whole lot of travel and being away from home for long periods of time hence when it came to housing what i needed most was flexibility and a mortgage would tie me down plus it was absolutely ridiculous to even think of taking one at the then rates plus the artificial nature of realty pricing didn't help.
i decided to buy upfront a two bed flat on MSA rd for 5.5m as it would fit perfectly within my plans but while i was consolidating my funds for the purchase i read something on wazua about putting cash in bonds and using interest to pay rent and that is what i exactly did, got some 6m bought a 15 year bond at 11% fixed which gives me about 45k monthly then rented out a unit at the said flat complex for 28k service charge included all this was captured in a lease renewable every 2yrs and payable bi annually to tally with my interest payments.
i easily pay rent, monthly shopping and utilities even when i am not around.
i dont have issues with renting and if i wanted to upgrade all i need to do is get another bond to cover the difference in rent that i would pay at the new estate, the only home that i will be interested in building is my retirement home which i will build in my bunduz after retiring with the cash from the bonds
Good thoughts Vky, however, have you considered that after 15yrs the money you get back from the bonds will have been eaten up in value due to inflation. In addtion, the interest payments are fixed while rent expense is bound to increase over time. With your strategy, I feel you would be better off just buying the flat and then rent it out if you have to. i am not keen on the value of the cash after the bonds mature as long as it will be enough to set up a retirement home somewhere on the shores of lake victoria, for the rent increase the interest is sufficient to cater for any increases mind you i have a lease and rent can only be increased every 2 years and i dont think i will be staying at that place for more than 4yrs, my lifestyle needs some flexibility and my current arrangement works fine for me it might not work for some folk 'One headache for famous medieval holy people was that someone might murder you to acquire your body parts for the relics trade'
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Rank: Elder Joined: 6/2/2011 Posts: 4,824 Location: -1.2107, 36.8831
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obiero wrote:a mortgage is a necessary evil. the trick is to ensure computation is on reducing balance and thereafter pay it down fast i.e incase monthly repay is set at 20K, place an extra 20K or more.. that way, you halve the time it takes to clear. its a fight that can be won. plus incase you die, your children shall not be left homeless as insurance shall settle outstanding balance in full.. Aiiih mboss weee. Which mortgage is this ya 20K/-? Kwani ni nyumba au store? A 2,000,000/- 'house' at 12% P.A interest rate for 12 years comes to over 26K/-. Receive with simplicity everything that happens to you.” ― Rashi
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Rank: Elder Joined: 7/22/2009 Posts: 7,910
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http://www.investinginafrica.net/african-stock-markets/african-stock-market-performance/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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Rank: Elder Joined: 7/22/2009 Posts: 7,910
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dunkang wrote:obiero wrote:a mortgage is a necessary evil. the trick is to ensure computation is on reducing balance and thereafter pay it down fast i.e incase monthly repay is set at 20K, place an extra 20K or more.. that way, you halve the time it takes to clear. its a fight that can be won. plus incase you die, your children shall not be left homeless as insurance shall settle outstanding balance in full.. Aiiih mboss weee. Which mortgage is this ya 20K/-? Kwani ni nyumba au store? A 2,000,000/- 'house' at 12% P.A interest rate for 12 years comes to over 26K/-.  People have jokes!!! Let's use factual numbers. Mortgage repayment of 20k a month at 15% interest rate??? The mortgage would have to be of Kshs. 1,428,992.86=PV(15%/12,15*12,-20000,0,0) Where is this you are buying a house for 1.4 million??? 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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Rank: Veteran Joined: 10/9/2006 Posts: 1,502
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Mortgage should be avoided if you can. If you can afford kshs3m for downpayment,it might be better to buy plot construct a simple house. work to prosper
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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dunkang wrote:obiero wrote:a mortgage is a necessary evil. the trick is to ensure computation is on reducing balance and thereafter pay it down fast i.e incase monthly repay is set at 20K, place an extra 20K or more.. that way, you halve the time it takes to clear. its a fight that can be won. plus incase you die, your children shall not be left homeless as insurance shall settle outstanding balance in full.. Aiiih mboss weee. Which mortgage is this ya 20K/-? Kwani ni nyumba au store? A 2,000,000/- 'house' at 12% P.A interest rate for 12 years comes to over 26K/-. @dunkang, if a kes 2m mortgage at 15% interest has a repayment of kes 27k, as shown on the below calculator http://www.co-opbank.co....dex.php/loan-calculator
Then a property that can cost kes 2m and be rented out at 27k is most ideal. Most properties that bring in kes 27k monthly cost between 5 to 6m eg 2bdmed apartments at syokimau. The only property that i know can cost 2m and bring in around 27k monthly is the hotel room investment project below http://www.a4architect.c...ng-the-southern-bypass/
As Iron Sharpens Iron, So one Man Sharpens Another.
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Rank: Elder Joined: 6/2/2011 Posts: 4,824 Location: -1.2107, 36.8831
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Tokyo wrote:Mortgage should be avoided if you can. If you can afford kshs3m for downpayment,it might be better to buy plot construct a simple house. Mortgage is not a bad thing, the problem is the rate. Anything less than 6% (i.e. without anyother hidden things) is a BRILLIANT thing. Receive with simplicity everything that happens to you.” ― Rashi
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Rank: Elder Joined: 12/9/2009 Posts: 6,592 Location: Nairobi
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Lolest! wrote:Great piieces @blackman. But how many people make 25pc per year on investments? Where can you invest to get 25%??? If this were possible, why would any bank give loans at while they can put it in the 25% earner?
BBI will solve it :)
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Is Taking a Mortgage the WORST Decision Ever??
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