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Is Taking a Mortgage the WORST Decision Ever??
Rank: Elder Joined: 7/22/2009 Posts: 7,451
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Link: Lavington Flats Auction.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: Member Joined: 8/5/2011 Posts: 125
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@maichblack... this is misleading, viv a vis the topic being discussed
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Rank: Elder Joined: 7/21/2010 Posts: 6,176 Location: nairobi
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kiwaru wrote:@maichblack... this is misleading, viv a vis the topic being discussed its a relevant subject to me. "Don't let the fear of losing be greater than the excitement of winning."
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Rank: Member Joined: 8/5/2011 Posts: 125
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mlennyma wrote:kiwaru wrote:@maichblack... this is misleading, viv a vis the topic being discussed its a relevant subject to me. I think its off... The article is with regards to a "failed" project, after which the bank and the developer are now trying to protect their interests. The failure did not result from the financing arrangement but probably due to wrong strategy (poor sales from numerous possibilities e.g. oversupply in the market) or realised risk (numerous in our economic context, and in that subsector) This thread, on the other hand, is about the options for financing home-ownership (not project) and the opportunity cost for those resources
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Rank: Veteran Joined: 11/15/2013 Posts: 1,977 Location: Here
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kiwaru wrote:mlennyma wrote:kiwaru wrote:@maichblack... this is misleading, viv a vis the topic being discussed its a relevant subject to me. I think its off... The article is with regards to a "failed" project, after which the bank and the developer are now trying to protect their interests. The failure did not result from the financing arrangement but probably due to wrong strategy (poor sales from numerous possibilities e.g. oversupply in the market) or realised risk (numerous in our economic context, and in that subsector) This thread, on the other hand, is about the options for financing home-ownership (not project) and the opportunity cost for those resources @kiwaru i would say you don't have a third eye. The principles, circumstances,terms &conditions are more else similar for mortgage!!! haha hehe so a "project" is not a "home /house" . pleease. Everybody STEALS, a THIEF is one who's CAUGHT stealing something of LITTLE VALUE. !!!
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Rank: Member Joined: 8/5/2011 Posts: 125
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Boris Boyka wrote:kiwaru wrote:mlennyma wrote:kiwaru wrote:@maichblack... this is misleading, viv a vis the topic being discussed its a relevant subject to me. I think its off... The article is with regards to a "failed" project, after which the bank and the developer are now trying to protect their interests. The failure did not result from the financing arrangement but probably due to wrong strategy (poor sales from numerous possibilities e.g. oversupply in the market) or realised risk (numerous in our economic context, and in that subsector) This thread, on the other hand, is about the options for financing home-ownership (not project) and the opportunity cost for those resources @kiwaru i would say you don't have a third eye. The principles, circumstances,terms &conditions are more else similar for mortgage!!! haha hehe so a "project" is not a "home /house" . pleease. I dont think so. The objective of a project defines the measure of success. A developer (Singh, et al) doing a block of apartments vs someone doing a mortgage for his/her own house? ...worlds apart my friend. Certain factors like peace of mind, sacrifices by other members of the family, unaccounted for costs when pursuing a "personal" project makes it different from the developer who registers a firm (company, partnership, etc), does a proposal, seeks funding and creates a project management system to initiate and run the project. In the "personal" project, the objective tends to be the off-setting of constant cost (rent) in light of the fact that one and one's own cannot live on a tree i.e. meeting a BASIC NEED. While building a block of flats, one would probably be looking at income through sales/rent (journey to SELF SUFFICIENCY / SELF ACTUALISATION) Have you not noticed that the biggest component of mortgages, esp new ones, are salary-backed - i.e. based on primary income. Most developers use cashflows from sales / existing or anticipated income from the same project. Ask any banker
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Rank: Veteran Joined: 4/16/2014 Posts: 1,420 Location: Bohemian Grove
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mlennyma wrote:kiwaru wrote:@maichblack... this is misleading, viv a vis the topic being discussed its a relevant subject to me. Sounds like they had taken an accelerated mortgage but the payments stalled midway.
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Rank: Elder Joined: 7/22/2009 Posts: 7,451
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@Kiwaru - How many nicely spaced (not extravagant) "standard" two bedroom units can you fit per floor in a 50 by100 plot. Other wazuans who have done it before can also contribute. 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: Member Joined: 6/17/2011 Posts: 229
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Kihara joni wrote:MaichBlack wrote:I know a number of people believe taking a mortgage is good decision because it enables you to own a house using money you 'don't have' and pay for it slowly. I beg to differ in the strongest terms.
Let's talk numbers.
If you take a mortgage for 10 million at a rate of 15% repayable in 20 years, you will be paying Kshs. 131,678.96/= every month:-
=PMT(15%/12,20*12,10000000,0,0)
Now, in 20 years, you will have paid
131,678.96 * 12 * 20 = Kshs. 31,602,949.98
Will the house be worth 31 million in 20 years? Maybe, Maybe not. But that is not the basis of my argument!
Now, assuming you decided to be investing the money [while paying rent] what would you end up with?
Let's assume you use the 31k to pay rent [you cantop it up if you want] and then be investing the 100k monthly at an annual return of 25% [which many wazuans can do with their eyes closed!] your investment will be worth a whooping Kshs. 671,911,370.91/= in 20 years!!!
=FV(25%/12,20*12,-100000,0,0)
Which guy would you rather be???
25% wel that caught my eye, any threads on how to achieve 25% or even more than 12% am currently getting? @Kihara, investing in real estate and private equity can easily give you 25% or more per year in dividends, bonuses and capital gains.
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Rank: Elder Joined: 7/11/2012 Posts: 5,222
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eco wrote:Kihara joni wrote:MaichBlack wrote:I know a number of people believe taking a mortgage is good decision because it enables you to own a house using money you 'don't have' and pay for it slowly. I beg to differ in the strongest terms.
Let's talk numbers.
If you take a mortgage for 10 million at a rate of 15% repayable in 20 years, you will be paying Kshs. 131,678.96/= every month:-
=PMT(15%/12,20*12,10000000,0,0)
Now, in 20 years, you will have paid
131,678.96 * 12 * 20 = Kshs. 31,602,949.98
Will the house be worth 31 million in 20 years? Maybe, Maybe not. But that is not the basis of my argument!
Now, assuming you decided to be investing the money [while paying rent] what would you end up with?
Let's assume you use the 31k to pay rent [you cantop it up if you want] and then be investing the 100k monthly at an annual return of 25% [which many wazuans can do with their eyes closed!] your investment will be worth a whooping Kshs. 671,911,370.91/= in 20 years!!!
=FV(25%/12,20*12,-100000,0,0)
Which guy would you rather be???
25% wel that caught my eye, any threads on how to achieve 25% or even more than 12% am currently getting? @Kihara, investing in real estate and private equity can easily give you 25% or more per year in dividends, bonuses and capital gains. How?
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Rank: Veteran Joined: 11/21/2006 Posts: 1,590
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Reading thru the thread, its clear that most of us were green when we took our first mortgage hence some nasty experiences or surprises. Was speaking to a banker the other day and almost all the ongoing private developments in Nai currently are 90-100% financed by the banks. Kwani private developers ni wajinga? Sehemu ndio nyumba
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Rank: Elder Joined: 11/27/2007 Posts: 3,604
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Mainat wrote:Reading thru the thread, its clear that most of us were green when we took our first mortgage hence some nasty experiences or surprises.
Was speaking to a banker the other day and almost all the ongoing private developments in Nai currently are 90-100% financed by the banks.
Kwani private developers ni wajinga?
Sio wajinga. Take a mortgage but ensure in 3 years it's regenerating income that helps repay it. Taking one for residential use does not make sense, citing from the computation done above. Most of the cost of mortgage is the interest on the money so the longer one takes in repaying the less lucrative is and the higher the interest rate the worse the damage to your pocket African parents don't know how to say sorry.. the closest you will get to a sorry is a 'have you eaten'
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Rank: Veteran Joined: 11/21/2006 Posts: 1,590
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The 25% pa return is highly erroneous. Most fund managers actually use the t-bill rate as a reference pt which means say 10%. At any rate, your money, you manage how you want. Sober wrote:Mainat wrote:Reading thru the thread, its clear that most of us were green when we took our first mortgage hence some nasty experiences or surprises.
Was speaking to a banker the other day and almost all the ongoing private developments in Nai currently are 90-100% financed by the banks.
Kwani private developers ni wajinga?
Sio wajinga. Take a mortgage but ensure in 3 years it's regenerating income that helps repay it. Taking one for residential use does not make sense, citing from the computation done above. Most of the cost of mortgage is the interest on the money so the longer one takes in repaying the less lucrative is and the higher the interest rate the worse the damage to your pocket Sehemu ndio nyumba
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Rank: Veteran Joined: 11/15/2013 Posts: 1,977 Location: Here
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Mainat wrote:The 25% pa return is highly erroneous. Most fund managers actually use the t-bill rate as a reference pt which means say 10%. At any rate, your money, you manage how you want. Sober wrote:Mainat wrote:Reading thru the thread, its clear that most of us were green when we took our first mortgage hence some nasty experiences or surprises.
Was speaking to a banker the other day and almost all the ongoing private developments in Nai currently are 90-100% financed by the banks.
Kwani private developers ni wajinga?
Sio wajinga. Take a mortgage but ensure in 3 years it's regenerating income that helps repay it. Taking one for residential use does not make sense, citing from the computation done above. Most of the cost of mortgage is the interest on the money so the longer one takes in repaying the less lucrative is and the higher the interest rate the worse the damage to your pocket Am one person who likes numbers too,even with 8% p.a interest the investment is superb. So @Mainat replace 25% with your 10% and give us the FV of that cash or @Maichb do it for us we see the reality Everybody STEALS, a THIEF is one who's CAUGHT stealing something of LITTLE VALUE. !!!
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Rank: Veteran Joined: 11/21/2006 Posts: 1,590
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Two or three other points to be borne in mind. Firstly if its was your intention to leave in area where houses cost Ksh10m. A Ksh10m house in Nai today will get you a rent of 45-55k. So if you decide that you can buy, but you'll rent, its not 100k you'll save. Rental increases. This is of course money you write off. Even a house renting for 31k today will be renting for 100k in 5 years time Time value of money. Finally, who said you have to pay the mortgage for 20yrs? Boris Boyka wrote:Mainat wrote:The 25% pa return is highly erroneous. Most fund managers actually use the t-bill rate as a reference pt which means say 10%. At any rate, your money, you manage how you want. Sober wrote:Mainat wrote:Reading thru the thread, its clear that most of us were green when we took our first mortgage hence some nasty experiences or surprises.
Was speaking to a banker the other day and almost all the ongoing private developments in Nai currently are 90-100% financed by the banks.
Kwani private developers ni wajinga?
Sio wajinga. Take a mortgage but ensure in 3 years it's regenerating income that helps repay it. Taking one for residential use does not make sense, citing from the computation done above. Most of the cost of mortgage is the interest on the money so the longer one takes in repaying the less lucrative is and the higher the interest rate the worse the damage to your pocket Am one person who likes numbers too,even with 8% p.a interest the investment is superb. So @Mainat replace 25% with your 10% and give us the FV of that cash or @Maichb do it for us we see the reality Sehemu ndio nyumba
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Rank: Veteran Joined: 11/15/2013 Posts: 1,977 Location: Here
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Mainat wrote:Two or three other points to be borne in mind. Firstly if its was your intention to leave in area where houses cost Ksh10m. A Ksh10m house in Nai today will get you a rent of 45-55k. So if you decide that you can buy, but you'll rent, its not 100k you'll save. Rental increases. This is of course money you write off. Even a house renting for 31k today will be renting for 100k in 5 years time Time value of money. Finally, who said you have to pay the mortgage for 20yrs? Boris Boyka wrote:Mainat wrote:The 25% pa return is highly erroneous. Most fund managers actually use the t-bill rate as a reference pt which means say 10%. At any rate, your money, you manage how you want. Sober wrote:Mainat wrote:Reading thru the thread, its clear that most of us were green when we took our first mortgage hence some nasty experiences or surprises.
Was speaking to a banker the other day and almost all the ongoing private developments in Nai currently are 90-100% financed by the banks.
Kwani private developers ni wajinga?
Sio wajinga. Take a mortgage but ensure in 3 years it's regenerating income that helps repay it. Taking one for residential use does not make sense, citing from the computation done above. Most of the cost of mortgage is the interest on the money so the longer one takes in repaying the less lucrative is and the higher the interest rate the worse the damage to your pocket Am one person who likes numbers too,even with 8% p.a interest the investment is superb. So @Mainat replace 25% with your 10% and give us the FV of that cash or @Maichb do it for us we see the reality You are now taking us back to Egypt!!!!  i thought you had something new? on # 493 you termed 25% erronious so to correct the error you proposed 10%.Either way calculate using 10% . Those values will be important for us to compare vs your Future rents. talking of time value ooh future value without a refference figure is useless. Everybody STEALS, a THIEF is one who's CAUGHT stealing something of LITTLE VALUE. !!!
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Rank: Veteran Joined: 9/18/2014 Posts: 1,127
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Boris Boyka wrote:Mainat wrote:Two or three other points to be borne in mind. Firstly if its was your intention to leave in area where houses cost Ksh10m. A Ksh10m house in Nai today will get you a rent of 45-55k. So if you decide that you can buy, but you'll rent, its not 100k you'll save. Rental increases. This is of course money you write off. Even a house renting for 31k today will be renting for 100k in 5 years time Time value of money. Finally, who said you have to pay the mortgage for 20yrs? Boris Boyka wrote:Mainat wrote:The 25% pa return is highly erroneous. Most fund managers actually use the t-bill rate as a reference pt which means say 10%. At any rate, your money, you manage how you want. Sober wrote:Mainat wrote:Reading thru the thread, its clear that most of us were green when we took our first mortgage hence some nasty experiences or surprises.
Was speaking to a banker the other day and almost all the ongoing private developments in Nai currently are 90-100% financed by the banks.
Kwani private developers ni wajinga?
Sio wajinga. Take a mortgage but ensure in 3 years it's regenerating income that helps repay it. Taking one for residential use does not make sense, citing from the computation done above. Most of the cost of mortgage is the interest on the money so the longer one takes in repaying the less lucrative is and the higher the interest rate the worse the damage to your pocket Am one person who likes numbers too,even with 8% p.a interest the investment is superb. So @Mainat replace 25% with your 10% and give us the FV of that cash or @Maichb do it for us we see the reality You are now taking us back to Egypt!!!! i thought you had something new? on # 493 you termed 25% erronious so to correct the error you proposed 10%.Either way calculate using 10% . Those values will be important for us to compare vs your Future rents. talking of time value ooh future value without a refference figure is useless. @mainat you can't achieve a rental increase from 31k to 100k in 5 years in the Kenyan market as currently constituted. The annual rent escalation ranges from 5-10% for residential units with commercial property preferring biannual increase of atmost 20%. The main purpose of the stock market is to make fools of as many people as possible.
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Rank: Veteran Joined: 2/2/2012 Posts: 1,134 Location: Nairobi
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I have observed that those who proclaim that mortgages are bad fall into one of two groups:
GROUP 1:- those who have never taken a mortgage in their lives
GROUP 2:- those who took a mortgage and defaulted on payments
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Rank: Veteran Joined: 11/15/2013 Posts: 1,977 Location: Here
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chiaroscuro wrote:I have observed that those who proclaim that mortgages are bad fall into one of two groups:
GROUP 1:- those who have never taken a mortgage in their lives
GROUP 2:- those who took a mortgage and defaulted on payments
to complete the statements 1.......... and have a house they built or bought. 2............the bank NEVER compromised regardless of situation and the fellows lost terribly. Everybody STEALS, a THIEF is one who's CAUGHT stealing something of LITTLE VALUE. !!!
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Rank: New-farer Joined: 4/8/2015 Posts: 42
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Boris Boyka wrote:chiaroscuro wrote:I have observed that those who proclaim that mortgages are bad fall into one of two groups:
GROUP 1:- those who have never taken a mortgage in their lives
GROUP 2:- those who took a mortgage and defaulted on payments
to complete the statements 1.......... and have a house they built or bought. 2............the bank NEVER compromised regardless of situation and the fellows lost terribly. A bad workman quarrels with his tools, and a mortgage is just a tool. Na Yesu alisema in Luke 14:28 kwamba ""Suppose one of you wants to build a tower. Won't you first sit down and estimate the cost to see if you have enough money to complete it?"
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