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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: 13,516 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..
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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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: 4,818 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: 7,455
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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: 7,455
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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: 4,818 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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Rank: New-farer Joined: 1/3/2014 Posts: 32
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MaichBlack wrote: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??? @MaichBlack the numbers for mortgage are readily availabe. Unfortunately, we are still waiting for the numbers of NSE performance over 10-20 years.
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Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
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dunkang wrote: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. @dunkang, true. The rates in Kenya are too high. Your bet is as good as mine as to whether these rates will ever come down. The only solution left is for Kenyans to think outside the box and make lemonade with the lemons they have been dealt with. Solutions such as the buy a hotel room for kes 2m which can give/offset the mortgage of 27k monthly are the was to go. Other solutions will be for people to build smaller houses/open plan/american style kitchens, etc etc As Iron Sharpens Iron, So one Man Sharpens Another.
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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knight026 wrote:MaichBlack wrote: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??? @MaichBlack the numbers for mortgage are readily availabe. Unfortunately, we are still waiting for the numbers of NSE performance over 10-20 years. 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: Member Joined: 9/27/2006 Posts: 503
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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knight026 wrote:Rollout wrote: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. The concept here is `cherry picking'. Otherwise, also stocks don't appreciate indefinately @knight026 - Stock trading is all about cherry picking!!! If you cannot cherry pick, you have no business being in the stock market. Don't you ever follow discussions in the investors section of wazua for example??? These discussions are always geared towards cherry picking!!! That's the name of the game - for people who know what they are doing! That's why there are threads like "Equity Bank vs KCB". It's obvious BOTH banks are growing but individuals still want to put their money in the bank with greatest return. BAT is a profit making company with an extremely generous dividend policy. But you don't see a thread encouraging people to buy the stock. Why? The price is not "right". When it is, you'll see us directing lorry loads of cash in that direction. There are some many threads in wazua. Stop being lazy and click on some of them and you will see the kind of returns serious wazuans make. All the information is there in black and white. And I have given you so many links and I don't know why you are clicking any of them! 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: New-farer Joined: 1/3/2014 Posts: 32
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If we are cherry picking,then you shouldn't have compounded on the return rate. Furthermore, am not asking to challenge, a review of the performance for the past 10-20 years will put your argument in perspective.
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Rank: Elder Joined: 12/7/2012 Posts: 11,908
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knight026 wrote:MaichBlack wrote: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??? @MaichBlack the numbers for mortgage are readily availabe. Unfortunately, we are still waiting for the numbers of NSE performance over 10-20 years. @All you should know people. ... @Obeiro is likely to be working for a financial institution/bank where the rates are less than 8% and repayment period is the retirement age minus your age. therefere the 20k monthly repayment can be even 5m! In the business world, everyone is paid in two coins - cash and experience. Take the experience first; the cash will come later - H Geneen
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Rank: Veteran Joined: 11/2/2006 Posts: 1,206 Location: Nairobi
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2012 wrote: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? Ya'll stop being lazy & as someone said, read threads on Wazua! I have made net returns of 37% on Coop Bank (9 months) & 12% on Equity (17 days). Of course this wont happen every year....but I think you can make decent returns at NSE. Perhaps Guka can give us some 10-20yr perspective :) Formally employed people often live their employers' dream & forget about their own.
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Rank: New-farer Joined: 1/3/2014 Posts: 32
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bird_man wrote:2012 wrote: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? Ya'll stop being lazy & as someone said, read threads on Wazua! I have made net returns of 37% on Coop Bank (9 months) & 12% on Equity (17 days). Of course this wont happen every year....but I think you can make decent returns at NSE. Perhaps Guka can give us some 10-20yr perspective :) No one is lazy. Everyone knows the numbers have been good the past 2-3 years. That withstanding, to conclusively argue against mortgages, lets get the numbers for 10-20 years. Then get numbers for real estate, and we compare.
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Rank: Elder Joined: 7/22/2009 Posts: 7,455
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bird_man wrote:2012 wrote: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? Ya'll stop being lazy & as someone said, read threads on Wazua! I have made net returns of 37% on Coop Bank (9 months) & 12% on Equity (17 days). Of course this wont happen every year....but I think you can make decent returns at NSE. Perhaps Guka can give us some 10-20yr perspective :) I'm surprised people are still asking this question (How you can have 25% returns). I provided them with evidence and links as early as post# 9 and post# 14. All they have to do is click! But then again some wazuans are obviously in the mortgages and real estate [selling of overpriced houses - 5th floor 3 bedroom house at 20m!] business and they will not let FACTS get in the way of a "good" argument. You can imagine a sales executive who makes a living "selling loans" going through this thread!!! He/she will definitely ignore all the facts! 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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