Wazua
»
Investor
»
Property
»
Is Taking a Mortgage the WORST Decision Ever??
Rank: New-farer Joined: 1/3/2014 Posts: 32
|
knight026 wrote:Top yielding investments 2013-
Nse-16%
Govt Securities-8.2%
Fixed deposit-6.6%
Real estate-6% I gave numbers for average investments yield 2013. To prove the hypothesis against mortgages, we need solid numbers over a period of time, 10-20 years for the four types of investments.
|
|
|
Rank: Member Joined: 1/26/2011 Posts: 211 Location: Nairobi
|
Very informative thread.
A few years ago I missed out on buying a house via mortgage. For the money I had saved for the down payment (2M), I put it in land and stocks.
My colleagues who were "lucky" to get the mortgage were crying in 2012 due to the repayments going up. One was actually having monthly repayments of 158K from 90K!
With my monthly savings over the duration, I can comfortably put up a mansion and still have peace of mind, and most importantly, I am liquid throughout !
|
|
|
Rank: Chief Joined: 5/9/2007 Posts: 13,095
|
Now that we are all on the same point on that the mortgage rates are un-acceptably too high, what would be the remedy? Only about 30,000 households are on that bus, meaning million others are out there in the rain. What if a group of investors set up aside some funds and led to the other millions at "acceptable" rates and tap on the economies of scale?
|
|
|
Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
|
bottomline is that kenyan bank loans are just too expensive for most people to afford to pay back. The rates should be reduced to similar in usa,canada, australia, europe, i.e below 5% p.a. Such a reduction will have to involve reduction of inflation. Reduction of inflation means rechanging/reorganising govt as we know it, especially land laws. This is very complex, involving high levels of meritocracy, and i cant see Govt being able to tackle this in the next 20 to 30 years. In the meantime, other alternatives to financing real estate such as pooling resources , reits, should be encouraged. As Iron Sharpens Iron, So one Man Sharpens Another.
|
|
|
Rank: Elder Joined: 11/28/2006 Posts: 1,799
|
Rollout wrote: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. Not necessarily true. If you have a mortgage at reducing balance and you pay lumpsums in the formative years then this reduces the interest you pay. Maich has som valid points but there are also assumptions that he is making which are puzzzling!! 1. Why are u assuming that if a guy takes a mortgage for 20 years he will stick to the time plan and actually pay the loan over the 20 years. What if he clears his loan within 5 years. have u calculated the total costs(Mortgage is on a reducing balance and not fixed rate). I will give you a personal experience not a friend of a friend. Took a mortgage for a 3bdroom apartment worth 3.2M in 2008. Interest rate of 12% reducing balance. Repayment PM was 36K. With side hustles i used to make a payment of 60K per month and when i got some windfall somewhere i would use it to offset the loan. By march 2010 i had already finished the loan despite interest rate having being adjusted to 16%. In total i had paid 4.8M inclusive interest . I was staying in the house during that duration. 2012 January i sold the house for 6.2M cash. Put a deposit for a stand alone house on MSA road valued at 10.2M. Took a sacco loan and paid of the balance and am currently almost through with paying off the sacco loan. As we speak the current valuation for the stand alone house am staying in is 15M. And my plan is to sell it off or mortgage it off(use it as collateral) and get another property elsewhere say Kiambu road, Limuru area etc... Mpaka ile siku nitajikuta Karen on a 2 acre plot with a nice house and enough shamba to feed myself. Like maich said it depends on what you goals are and what ur targets are. By me being taking the mortgage at that time and accelerating payments i ended up with some profits which enabled me to get a better house without struggling so much. The biggest issue with mortgages is that most people want to buy their dream homes with the 1st mortgage thus go for exorbitantly priced houses..(making them not able to accelerate payments) My 2 cents
|
|
|
Rank: Member Joined: 10/19/2009 Posts: 671 Location: Nairobi
|
chemos wrote:
The biggest issue with mortgages is that most people want to buy their dream homes with the 1st mortgage thus go for exorbitantly priced houses..(making them not able to accelerate payments)
My 2 cents
THANK YOU.
Life is joy, death is peace, but the transition is very difficult.
|
|
|
Rank: Elder Joined: 12/7/2012 Posts: 11,908
|
@Chemos, thanks and that is exactly what i meant in my post #17 though i didnot explain it very well. Started in Koma, then Buru, then Southlands, then Jambo on my way to Karen. Tutakutana huko!. Start with what you can swallow in titbits and pieces and as you grow, increase both the pieces and the rate of swallowing! Works wonders. We also need to recognise that real estate also appreciate over time, roughly after 3 years. In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
|
|
|
Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
|
@Angelica, true, people have to move upwards slowly. I own my home 10km from Karen centre, mortgage-free, while my office is in Karen. I also aim to in future, move my home to 0km radius from Karen shopping centre. check usa morgtgage rates here, an average of 3.2% p.a http://www.bankrate.com/national-mortgage-rates/As Iron Sharpens Iron, So one Man Sharpens Another.
|
|
|
Rank: Member Joined: 5/8/2008 Posts: 288
|
Brilliant plans by @Chemos, @Angelica _ann & a4architect.com...we are on the same school of thoughts..currently in my own house mortgage-free but still hope to get to a Karen equivalent estate one day without taking a mortgage
|
|
|
Rank: Elder Joined: 9/23/2010 Posts: 2,220 Location: Sundowner,Amboseli
|
Mukiri wrote:tinker wrote:Sufficiently Philanga....thropic wrote:Avoid debt(slavery) at all costs.You will be working for the KCBs and Equitys of this world. Better to work with the little you have.Then you will have PEACE-THE ULTIMATE GOAL! Does this advise against taking any kind of debt even for business expansion, buying an asset such as land or car. Debt IS NOT slavery! Debt is how wealth can be fast tracked. Read about leveraging OPM (Other people's money). Important thing is to have a plan and good advisors/mentors. Asset should bring you money ie the land and car should be for biachara Debt is slavery(The bank being the master).You need debt once in a while as @Mukiri has eloquently put across but all efforts should be made to quickly get out of debt.Why?PEACE OF MIND! @SufficientlyP
|
|
|
Rank: Elder Joined: 7/11/2012 Posts: 5,222
|
Sufficiently Philanga....thropic wrote:Mukiri wrote:tinker wrote:Sufficiently Philanga....thropic wrote:Avoid debt(slavery) at all costs.You will be working for the KCBs and Equitys of this world. Better to work with the little you have.Then you will have PEACE-THE ULTIMATE GOAL! Does this advise against taking any kind of debt even for business expansion, buying an asset such as land or car. Debt IS NOT slavery! Debt is how wealth can be fast tracked. Read about leveraging OPM (Other people's money). Important thing is to have a plan and good advisors/mentors. Asset should bring you money ie the land and car should be for biachara Debt is slavery(The bank being the master).You need debt once in a while as @Mukiri has eloquently put across but all efforts should be made to quickly get out of debt.Why?PEACE OF MIND! Boss, sio matusi but read this LINKEspecially 'Average people believe you need money to make money. Rich people use other people's money.'
|
|
|
Rank: Member Joined: 1/13/2014 Posts: 386 Location: Denmark
|
Mukiri wrote:Sufficiently Philanga....thropic wrote:Mukiri wrote:tinker wrote:Sufficiently Philanga....thropic wrote:Avoid debt(slavery) at all costs.You will be working for the KCBs and Equitys of this world. Better to work with the little you have.Then you will have PEACE-THE ULTIMATE GOAL! Does this advise against taking any kind of debt even for business expansion, buying an asset such as land or car. Debt IS NOT slavery! Debt is how wealth can be fast tracked. Read about leveraging OPM (Other people's money). Important thing is to have a plan and good advisors/mentors. Asset should bring you money ie the land and car should be for biachara Debt is slavery(The bank being the master).You need debt once in a while as @Mukiri has eloquently put across but all efforts should be made to quickly get out of debt.Why?PEACE OF MIND! Boss, sio matusi but read this LINKEspecially 'Average people believe you need money to make money. Rich people use other people's money.' I believe debt should be employed to investments and that's how one uses other peoples' money to make kills and I surely don't classify a home as investment . It has been a point of debate in this forum. Seeing is believing
|
|
|
Rank: Elder Joined: 7/11/2012 Posts: 5,222
|
webish wrote:chemos wrote:
The biggest issue with mortgages is that most people want to buy their dream homes with the 1st mortgage thus go for exorbitantly priced houses..(making them not able to accelerate payments)
My 2 cents
THANK YOU. Angelica _ann wrote:@Chemos, thanks and that is exactly what i meant in my post #17 though i didnot explain it very well. Started in Koma, then Buru, then Southlands, then Jambo on my way to Karen. Tutakutana huko!.
Start with what you can swallow in titbits and pieces and as you grow, increase both the pieces and the rate of swallowing! Works wonders.
We also need to recognise that real estate also appreciate over time, roughly after 3 years. a4architect.com wrote:@Angelica, true, people have to move upwards slowly. I own my home 10km from Karen centre, mortgage-free, while my office is in Karen. I also aim to in future, move my home to 0km radius from Karen shopping centre. check usa morgtgage rates here, an average of 3.2% p.a http://www.bankrate.com/national-mortgage-rates/
 People are too attached to 'thing's' way too much, like shares in certain companies, 1st houses, 1st cars etc. Grow into your dream home.
|
|
|
Rank: Elder Joined: 4/22/2009 Posts: 2,863
|
sparkly wrote: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. Some years back, there was a wonderful discussion in Wazua(Stockskenya)on merits and demerits of sacco loans. At the end of the debate, sacco loans were completely demystified. Take a look here. http://www.wazua.co.ke/f....aspx?g=posts&t=1109IF YOU EXPECT ME TO POST ANYTHING POSITIVE ABOUT ASENO, YOU MAY AS WELL SIT ON A PIN
|
|
|
Rank: Member Joined: 4/20/2012 Posts: 888
|
Angelica _ann wrote:@Chemos, thanks and that is exactly what i meant in my post #17 though i didnot explain it very well. Started in Koma, then Buru, then Southlands, then Jambo on my way to Karen. Tutakutana huko!.
Start with what you can swallow in titbits and pieces and as you grow, increase both the pieces and the rate of swallowing! Works wonders.
We also need to recognise that real estate also appreciate over time, roughly after 3 years. I have noted several people have an objective of being in Karen one day; My thinking is why can't we make our own "Karen". Karen was not there sometimes back neither was Muthaiga. I live in a quiet neighbourhood which God willing we envisage to transform it to "New Karen". I believe it can be done. Watch this space. The point is valid; we need to build our dream homes gradually.
|
|
|
Rank: Elder Joined: 9/23/2010 Posts: 2,220 Location: Sundowner,Amboseli
|
Mukiri wrote:Sufficiently Philanga....thropic wrote:Mukiri wrote:tinker wrote:Sufficiently Philanga....thropic wrote:Avoid debt(slavery) at all costs.You will be working for the KCBs and Equitys of this world. Better to work with the little you have.Then you will have PEACE-THE ULTIMATE GOAL! Does this advise against taking any kind of debt even for business expansion, buying an asset such as land or car. Debt IS NOT slavery! Debt is how wealth can be fast tracked. Read about leveraging OPM (Other people's money). Important thing is to have a plan and good advisors/mentors. Asset should bring you money ie the land and car should be for biachara Debt is slavery(The bank being the master).You need debt once in a while as @Mukiri has eloquently put across but all efforts should be made to quickly get out of debt.Why?PEACE OF MIND! Boss, sio matusi but read this LINKEspecially 'Average people believe you need money to make money. Rich people use other people's money.' Thanks @Mukiri for the link though i read all that in campus in the mid to late 90s and also 8 years ago in the above mentioned books(Rich dad & cashflow quadrant and also had the privilege to utilise that in business to this day. Great stuff in that link, i must say! @SufficientlyP
|
|
|
Rank: Member Joined: 10/19/2009 Posts: 671 Location: Nairobi
|
Angelica _ann wrote:@Chemos, thanks and that is exactly what i meant in my post #17 though i didnot explain it very well. Started in Koma, then Buru, then Southlands, then Jambo on my way to Karen. Tutakutana huko!.
Start with what you can swallow in titbits and pieces and as you grow, increase both the pieces and the rate of swallowing! Works wonders.
This should be so relevant for starters like myself. @Angelica, you always sound like someone I wouldn't mind chatting over a cup of coffee. I follow keenly your comments on "Property section".. Keep ON.
Life is joy, death is peace, but the transition is very difficult.
|
|
|
Rank: Member Joined: 6/17/2010 Posts: 572
|
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 'One headache for famous medieval holy people was that someone might murder you to acquire your body parts for the relics trade'
|
|
|
Rank: Chief Joined: 5/9/2007 Posts: 13,095
|
MKWASI wrote:Angelica _ann wrote:@Chemos, thanks and that is exactly what i meant in my post #17 though i didnot explain it very well. Started in Koma, then Buru, then Southlands, then Jambo on my way to Karen. Tutakutana huko!.
Start with what you can swallow in titbits and pieces and as you grow, increase both the pieces and the rate of swallowing! Works wonders.
We also need to recognise that real estate also appreciate over time, roughly after 3 years. I have noted several people have an objective of being in Karen one day; My thinking is why can't we make our own "Karen". Karen was not there sometimes back neither was Muthaiga. I live in a quiet neighbourhood which God willing we envisage to transform it to "New Karen". I believe it can be done. Watch this space. The point is valid; we need to build our dream homes gradually. Where is this? You never know, we may join you in building the dream. Remember they all started that way. Loresho, Kitsuru, na wengineo
|
|
|
Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
|
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
@vky, thats a very smart move to use your investments to pay of your rent. This gives you flexibility in location choice of your home. In the hotel room investment option here http://www.a4architect.c...ng-the-southern-bypass/
the kes 1.74m sale price per room investors can chanel the 25k per month income to pay off rent anywhere around Nairobi instead of using kes 5m to buy a house and offset the same amount/25k per month. As Iron Sharpens Iron, So one Man Sharpens Another.
|
|
|
Wazua
»
Investor
»
Property
»
Is Taking a Mortgage the WORST Decision Ever??
Forum Jump
You cannot post new topics in this forum.
You cannot reply to topics in this forum.
You cannot delete your posts in this forum.
You cannot edit your posts in this forum.
You cannot create polls in this forum.
You cannot vote in polls in this forum.
|