After crunching the numbers, I conclude that above statement is utterly false and mortgage is the biggest drain on investment ever.

In what world would renting be better than taking a mortgage? Even at the high interest rates in Kenya.

Imagine I decide today to get a mortgage for a house worth Kshs 7M paying 50K a month for 20 years and you decide to rent a similar house at 35K per month.

10 years down the road, I would have spent 6M towards payment for the house and you would have spent 4.2M in rent.

The difference between us at this point would be that if we both became incapacitated, I would be able to sell the house at a higher value which would be easily be 10M, pay the Bank what its owed, pocket a tidy sum and pay cash for a cheaper house. This is unlike you whose likely only option would be to hide from the landlord's eviction notice.

Through the increased value of the house and the money already paid I would also be able to access further funding through equity release and refinancing to cater to other investment opportunities.

I would like you to demonstrate how the 15K per month savings you are making by paying rent would help you achieve anything close to what I have mentioned.

You're assuming that your home will appreciate nearly 50% over a decade, which is unlikely to be the case. Secondly, when you factor in the interest and other related charges, you'll end up paying 19M for a 7M home, according to https://calculator.co.ke...an-mortgage-calculator.

More importantly, if you were to do a distress sale due to one reason or another, chances are you'd not even get half of what your home is worth. In fact, the bank is more likely to foreclose on you. On the other hand, 6M - 4.2M is a cool 1.8M cash in hand, which you can use to relocate to your ancestral land upcountry, put up a nice house on free land, as well as rare some chickens and goats for your sustenance.

Methinks you should be glad you're renting rather than owning. As investors,we need to set emotions of owning a house aside and look at the raw data. So lets do the numbers.

To start with,you pay ridiculous interest on the mortgage,and you pay it upfront. You do not pay interest on rent. So lets say you buy a house for Ksh.6M and had no interest and lets say your monthly payment is 50K per month. It would take you 120 months or 10 years to pay it off. Now lets see what happens when you sign that mortgage for the same amount for 20 yrs at an interest rate of 15%. Now suddenly,your monthly payment has jumped from 50K to 79K and it would take you twice the amount of time to pay it off and also have to pay an extra 13M in interest on top of your 6M principal just to fully own your house after 20 years. At that rate,your house has to more than treble in value just to break even.

Then on top of that you have to pay homeowners insurance each year. Halafu there is the government and city tax. Maintenance expenses. I'm not sure how much these figures would be for a 6M house in Nai but you can imagine you will be paying much more than the 79K per month on your mortgage. So lets just say the expenses are another 3K per month.So over 20 years period with inflation this figure is another 1M.

Now lets compare to the renter,he does not pay any homeowners insurance,tax or maintenance fees. If anything breaks he just calls the landlord to fix it ASAP. So he still pays the 50K per month for the same place.

So lets compare:

20 years of home ownership: 20M

20 years of rental: 12M

The renter saves 8M over 20 years.

Now can you imagine what you could do with 8M savings over 20 years if you were investing this money in stocks? Lets just assume a modest return of 10% per year. Now calculate the compounded ROI of 33K per month(83K mortgage minus 50K rent). Your investment return could be worth 20M after 20 years. Now we know that the true cost is the opportunity cost.

Mortgage proponents argue that,but houses appreciate at a high rate so you get to build equity at the end of the 20 years which you can get by selling your house. To that I say good luck,houses have appreciated so ridiculously that if you bought a house now,forget getting the same appreciation in 20 years similar to what people who bough 20 years ago got in the last few years. Remember for you to break even,your house has to more than treble. And the renter still gets ahead of you by getting 20M after 20 years in form of ROI.

Not those are just the raw figures,how about other issues related to home ownership. What if you want to move because you have been IDPed,or your are moving on up,or you hate Nai,or for whatever reason. The renter can just up and leave,the only cost is the deposit. The homeowner has to list the property,pay commision to listing agents,incur closing costs. And then if you want to buy,you go through the same hastle with closing costs again.

Bottom line,paying rent is not throwing money away. The money the renster saves is enough for him to buy a house cash,or rent an extra 10 years for less money without extra costs. The renter can move at will without incuring closing costs etc. The homeowner and the renters are both renters,the former rents from the bank at a higher cost,the later rents from the landlord at a cheaper cost. And at the end of the 20 years,the renter has more money saved than the homeonewer.

Sorry for the long post,but I feel that mortgage is the biggest investment one can ever make so sober minds need to prevail. I invite homeonership proponents to shoot holes through my arguments using facts,not emotions.



When in doubt,follow the money.

True. Owning a home is a utility, not an investment.

Young people get swayed to cross over because non have been diligent at saving and investing so at mid life they get the fear of losing out and quickly get a mortgage.

I guarantee that if a person in their thirties was to purpose to save diligently an amount that hurts as much as a mortgage would hurt, put it in a mutual fund earning 8% interest, at 55yrs, they will be smiling more than the mortgage guy.

Problem here is lack of discipline and single minded determination.

wait till you lose that job or business takes a south direction.anything within 50 km of Nairobi isnt bundus

I disagree. A family home is also an investment. Let's say you want to live in runda where the rents are 250k per month. If you rent a home there you'd fork out 250k per month. But if you own a home there it saves you an expense of 250k per month unlike your renting neighbors. Your finances each month are +250k better because you own the home. Thus your home is actually putting 250k in your pocket each month. And you can use the 250k saved per month for other investments eg stocks, dustbowl etc

Also if the kids are all grown up and moved out you can rent the place out at 250k pm and rent an apartment at eg westlands at 70k and use the 180k balance for sustenance. If you lost your job you'd do the same ie renting out the place and getting a cheaper house and the 250k rental income would help absorb the job loss shock unlike your renting neighbour who would be in a terrible situation.

If you own a home you can use the property as security to acquire finance from banks and buy/develop more properties while a renter has no such options.

Additionally if rezoning was done and runda was classified as a high density estate like happened to lavington, kilimani, kileleshwa etc the value of your 1/2 acre plot + home would shoot through the roof with tens of developers begging you to sell the property to them for redevelopment to high end apartments.

Finally, when you go to the next world and your kids inherit your home, they will have a major head start unlike their "property-less" peers whose parents may have shunned home ownership and instead invested in KQ, HomeAfrica, ARM etc hoping to be multimillionaires in old age.

I like your train of thought. Only thing missing is how much it would cost you to acquire that home in Runda that pays you 250k in rent per month. Give me the number I'll give you the alternatives