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Is Taking a Mortgage the WORST Decision Ever??
Rank: Member Joined: 8/5/2011 Posts: 125
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webish wrote:Othelo wrote:kiwaru wrote:Just paid the first instalment into a 25 year old home loan (aka slow death). My reasons for going into mortgage:
1. Peace of mind... since my family must live somewhere, it had better be in MY HOUSE
2. Expense savings: initially an oxy-moron since 96% of the premiums go to interest payment. But the mortgage is 150% of the rent for that hse after raising 15%.
In my previous house I noticed that rent had doubled in about 5 years. So I am thinking long term here
3. Capital appreciation: with the estimated 12% annual capital appreciation, I am building equity that am living in, and I can tap into for whatever
Disclaimer: I am praying to God and i have every intention of clearing the loan before term (every 80% of premiums paid in advance eliminates 11 instalments (direct savings)
Wish me luck There is the catch. Manage that well and you will be home and dry! you also need to try hard to bring it to over 50% of repayment going towards paying the loan principal not interest! Question: Do Banks usually allow "irregular" topups to your monthly payments, so that more principal is returned earlier? Say, month 1 you pay as usual. Then month two, you pay twice ur monthly figure etc etc? Or only lump sums can be used to reduce Principal figure. I know Saccos can be flexible. But Banks? @webish... my bank does allow early repayments of top-ups of ANY amount(SCB). I have had a roll taking loans and now mortgage. I have taken 3 loans for 5 years and managed to clear within a year when the deal went through. On top of the relief of getting rid of the loan, I get a refund on the insurance amount (a milli paid within the year gets me back about 40K)
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Rank: Member Joined: 10/19/2009 Posts: 671 Location: Nairobi
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kiwaru wrote:
@webish... my bank does allow early repayments of top-ups of ANY amount(SCB). I have had a roll taking loans and now mortgage. I have taken 3 loans for 5 years and managed to clear within a year when the deal went through. On top of the relief of getting rid of the loan, I get a refund on the insurance amount (a milli paid within the year gets me back about 40K)
good for you. all the best in that.
Life is joy, death is peace, but the transition is very difficult.
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Rank: Hello Joined: 9/11/2014 Posts: 1
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 well while a mortgage is painfully expensive and with low returns i support the approach of a house loan first- security especially for family is important then you can venture into the stock. Your 25% statistics are on the high side or am i missing it?
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Rank: New-farer Joined: 3/1/2014 Posts: 82
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Useful link to do your math http://2ishi.com/buy-vs-rent.php “The beauty of success is that it doesn’t matter how many times you have failed, you only have to be right once and then everyone can tell you how lucky you are.” - Mark Cuban
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Rank: Veteran Joined: 7/3/2007 Posts: 1,634
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kiwaru wrote:Just paid the first instalment into a 25 year old home loan (aka slow death). My reasons for going into mortgage:
1. Peace of mind... since my family must live somewhere, it had better be in MY HOUSE
2. Expense savings: initially an oxy-moron since 96% of the premiums go to interest payment. But the mortgage is 150% of the rent for that hse after raising 15%.
In my previous house I noticed that rent had doubled in about 5 years. So I am thinking long term here
3. Capital appreciation: with the estimated 12% annual capital appreciation, I am building equity that am living in, and I can tap into for whatever
Disclaimer: I am praying to God and i have every intention of clearing the loan before term (every 80% of premiums paid in advance eliminates 11 installments (direct savings)
Wish me luck What you call slow death may turn out to be the best decision you have ever made. Many people, and I am one of them, can never save unless we are forced to. Over time the interest paid turns out to be a bargain, certainly compared to the 'interest' we give to KBL products. And, as you have noted, you are building equity. Most important, you are buying peace of mind, a good deal at any price. "The opposite of a correct statement is a false statement. But the opposite of a profound truth may well be another profound truth." (Niels Bohr)
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Rank: Elder Joined: 3/29/2011 Posts: 2,242
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Wakanyugi wrote:kiwaru wrote:Just paid the first instalment into a 25 year old home loan (aka slow death). My reasons for going into mortgage:
1. Peace of mind... since my family must live somewhere, it had better be in MY HOUSE
2. Expense savings: initially an oxy-moron since 96% of the premiums go to interest payment. But the mortgage is 150% of the rent for that hse after raising 15%.
In my previous house I noticed that rent had doubled in about 5 years. So I am thinking long term here
3. Capital appreciation: with the estimated 12% annual capital appreciation, I am building equity that am living in, and I can tap into for whatever
Disclaimer: I am praying to God and i have every intention of clearing the loan before term (every 80% of premiums paid in advance eliminates 11 installments (direct savings)
Wish me luck What you call slow death may turn out to be the best decision you have ever made. Many people, and I am one of them, can never save unless we are forced to. Over time the interest paid turns out to be a bargain, certainly compared to the 'interest' we give to KBL products. And, as you have noted, you are building equity. Most important, you are buying peace of mind, a good deal at any price. @Kiwaru, That's what ecomomists call utility- the value you derive from usage. It cannot be easily valued and even if in cash terms you pay an arm and a leg, the happiness derived is priceless. I find capital appreciation for residential property relative though. It does not make much sense for example if your home appreciated by lets say 500% and then you dispose it,the price of an alternative home with the same facilities may be more or less the price you dispose yours at. "Things that matter most must never be at the mercy of things that matter least." Goethe
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Rank: Elder Joined: 6/23/2009 Posts: 13,519 Location: nairobi
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webish wrote:Gordon Gekko wrote:Joshua Oigara at Mindspeak today, 'I took a mortgage a while back and it was a very painful experience. In retrospect it is one of the wisest decisions I've ever taken.' Must have humbled him. but came out wiser...  Captains of industry can clear a 4million mortgage in 2 months!!! thats not a good example to quote
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Rank: Elder Joined: 7/11/2012 Posts: 5,222
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Gathige wrote:Wakanyugi wrote:kiwaru wrote:Just paid the first instalment into a 25 year old home loan (aka slow death). My reasons for going into mortgage:
1. Peace of mind... since my family must live somewhere, it had better be in MY HOUSE
2. Expense savings: initially an oxy-moron since 96% of the premiums go to interest payment. But the mortgage is 150% of the rent for that hse after raising 15%.
In my previous house I noticed that rent had doubled in about 5 years. So I am thinking long term here
3. Capital appreciation: with the estimated 12% annual capital appreciation, I am building equity that am living in, and I can tap into for whatever
Disclaimer: I am praying to God and i have every intention of clearing the loan before term (every 80% of premiums paid in advance eliminates 11 installments (direct savings)
Wish me luck What you call slow death may turn out to be the best decision you have ever made. Many people, and I am one of them, can never save unless we are forced to. Over time the interest paid turns out to be a bargain, certainly compared to the 'interest' we give to KBL products. And, as you have noted, you are building equity. Most important, you are buying peace of mind, a good deal at any price. @Kiwaru, That's what ecomomists call utility- the value you derive from usage. It cannot be easily valued and even if in cash terms you pay an arm and a leg, the happiness derived is priceless. I find capital appreciation for residential property relative though. It does not make much sense for example if your home appreciated by lets say 500% and then you dispose it,the price of an alternative home with the same facilities may be more or less the price you dispose yours at. If you have surplus, after paying the mortgage... build! In a year or two, you might have finished building your house, then you can decide what to do with either one you are in, or one you've built...
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Rank: Elder Joined: 4/22/2010 Posts: 11,522 Location: Nairobi
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obiero wrote:webish wrote:Gordon Gekko wrote:Joshua Oigara at Mindspeak today, 'I took a mortgage a while back and it was a very painful experience. In retrospect it is one of the wisest decisions I've ever taken.' Must have humbled him. but came out wiser... Captains of industry can clear a 4million mortgage in 2 months!!! thats not a good example to quote Word... possunt quia posse videntur
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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maka wrote:obiero wrote:webish wrote:Gordon Gekko wrote:Joshua Oigara at Mindspeak today, 'I took a mortgage a while back and it was a very painful experience. In retrospect it is one of the wisest decisions I've ever taken.' Must have humbled him. but came out wiser... Captains of industry can clear a 4million mortgage in 2 months!!! thats not a good example to quote Word... Josh was talking about his life pre-KCB and pre-Bamburi days.
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Rank: Elder Joined: 12/7/2012 Posts: 11,908
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Gordon Gekko wrote:maka wrote:obiero wrote:webish wrote:Gordon Gekko wrote:Joshua Oigara at Mindspeak today, 'I took a mortgage a while back and it was a very painful experience. In retrospect it is one of the wisest decisions I've ever taken.' Must have humbled him. but came out wiser... Captains of industry can clear a 4million mortgage in 2 months!!! thats not a good example to quote Word... Josh was talking about his life pre-KCB and pre-Bamburi days. At Bamburi he sorted himself out, wacha tu!!! 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: Elder Joined: 6/23/2009 Posts: 13,519 Location: nairobi
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Angelica _ann wrote:Gordon Gekko wrote:maka wrote:obiero wrote:webish wrote:Gordon Gekko wrote:Joshua Oigara at Mindspeak today, 'I took a mortgage a while back and it was a very painful experience. In retrospect it is one of the wisest decisions I've ever taken.' Must have humbled him. but came out wiser... Captains of industry can clear a 4million mortgage in 2 months!!! thats not a good example to quote Word... Josh was talking about his life pre-KCB and pre-Bamburi days. At Bamburi he sorted himself out, wacha tu!!! Ai.. Ati Josh. Why do u sound intimate.. Am I missing something :) Na which pre-days are these u refer to.. The guy is only 39 years old
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
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Rank: Elder Joined: 5/27/2008 Posts: 3,760
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obiero wrote:Angelica _ann wrote:Gordon Gekko wrote:maka wrote:obiero wrote:webish wrote:Gordon Gekko wrote:Joshua Oigara at Mindspeak today, 'I took a mortgage a while back and it was a very painful experience. In retrospect it is one of the wisest decisions I've ever taken.' Must have humbled him. but came out wiser... Captains of industry can clear a 4million mortgage in 2 months!!! thats not a good example to quote Word... Josh was talking about his life pre-KCB and pre-Bamburi days. At Bamburi he sorted himself out, wacha tu!!! Ai.. Ati Josh. Why do u sound intimate.. Am I missing something :) Na which pre-days are these u refer to.. The guy is only 39 years old Sasa @obiero you think kama wewe ni late bloomer kila mtu ni late bloomer?
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Rank: Member Joined: 10/8/2010 Posts: 446 Location: london
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kiwaru wrote:Just paid the first instalment into a 25 year old home loan (aka slow death). My reasons for going into mortgage:
1. Peace of mind... since my family must live somewhere, it had better be in MY HOUSE
2. Expense savings: initially an oxy-moron since 96% of the premiums go to interest payment. But the mortgage is 150% of the rent for that hse after raising 15%.
In my previous house I noticed that rent had doubled in about 5 years. So I am thinking long term here
3. Capital appreciation: with the estimated 12% annual capital appreciation, I am building equity that am living in, and I can tap into for whatever
Disclaimer: I am praying to God and i have every intention of clearing the loan before term (every 80% of premiums paid in advance eliminates 11 instalments (direct savings)
Wish me luck My simple caculation for 10 million mortgage repayable in 25 years is 128k amonth. If you want to repay in ten years, monthly repayments is 160k.
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Rank: Member Joined: 10/19/2009 Posts: 671 Location: Nairobi
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african coloner wrote:
My simple caculation for 10 million mortgage repayable in 25 years is 128k amonth. If you want to repay in ten years, monthly repayments is 160k.
Yes. So, I'm also not sure how the below works... Care to explain @Kiwaru ? kiwaru wrote:
Disclaimer: I am praying to God and i have every intention of clearing the loan before term (every 80% of premiums paid in advance eliminates 11 instalments (direct savings)
Wish me luck
How???
Life is joy, death is peace, but the transition is very difficult.
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Rank: Member Joined: 8/5/2011 Posts: 125
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@Webish and @African coloner
Assume I took a loan for 12.5M, which the bank finances a loan to value of 80% meaning I pay a deposit of 2.5M and the bank finances 10M. The current rate is 13.9% but I got the "Grand Sale" rate of 10.9% earlier in the year.
The repayments would come to Kshs 97,289 for 300 month (using the MS Excel amortization template or any of the many online apps)
Now, take Kshs 80,000 (about 80% of the monthly premiums) and key it in the column for extra payments within the first 8 months and note that you reduce the total no of payments to 289 from 300.
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Rank: Member Joined: 8/5/2011 Posts: 125
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kiwaru wrote:@Webish and @African coloner
Assume I took a loan for 12.5M, which the bank finances a loan to value of 80% meaning I pay a deposit of 2.5M and the bank finances 10M. The current rate is 13.9% but I got the "Grand Sale" rate of 10.9% earlier in the year.
The repayments would come to Kshs 97,289 for 300 month (using the MS Excel amortization template or any of the many online apps)
Now, take Kshs 80,000 (about 80% of the monthly premiums) and key it in the column for extra payments within the first 8 months and note that you reduce the total no of payments to 289 from 300. I believe there is another grand sale coming... Coming probably early next year. Stanchart has recorded a dip in the number/total mortgage issued, and I think they are aggressively trying to claw back "their" market
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Rank: Member Joined: 2/16/2013 Posts: 123 Location: MSA
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SittingPretty wrote:mkonomtupu wrote:MaichBlack wrote:sparkly wrote:Jamani wrote:Mortage issues aside...real esate investment vs stock investment....real esate is far much better. How? Same as stock. Buy low sell high. I invest in both stocks and real estate - using my own cash. I don't borrow to buy stock. I don't borrow to buy real estate.You can make a killing from real estate - using your cash! Like the Ruiru bypass has made me a very happy Kenyan. Example: Bought a plot behind Kamakis (there was no Kamakis at the time - just one lonely looking pub/nyama choma place) just after the bypass was done. At that time, a plot - 2nd row - was going for 800k for an 1/8th. Today - 4 million!! And the place is just starting to grow! But I'm not selling yet. Last year bought a couple touching the great eastern bypass. The road is not built yet. Just beacons. Guess what! Most locals - including brokers don't exactly where it is so the price was low. People are also not sure "if the road will ever be built and when". But when it does... Trick - Buy places that are opening up and wait... @MaichBlack, why are you afraid of leverage a.k.a. debt. Leverage is one of the big tools after compound interest. So long as your rate of return is bigger than the cost of capital you can use leverage to go places. I have just finished paying up my Sacco loan for the the NIC and KCB shares bought at 25/ and 23/ respectively. Used in the right way using "other peoples money" will boost your portfolio. My rule is not to exceed 50% of my total assets Thanks to this thread I have made a decision I had not even contemplated a week ago: Got an offer letter for a small plot to be paid by cash, and had to do it fast before I change my mind, and applied for another small mortgage. My plan would to use my current rent and some extra cash to clear the debt as fast as possible. This means I also will pay more visits to the fuel pump. Apply for a loan against the free house to develop the plot. Would I have made a good decision, on the mortgage? Six months down the line: no I didnt get that mortgage and am still paying rent, guess its easier said than done! But I did buy the plot(s) cash, boy lets say christmas is going to be different this time! Some times I look at these tiny piece of land and am not so sure what my old man would say that it costed ksh3m. Well well well.... Timely advice is as lovely as golden apples in a silver basket. Proverbs 25:11
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Rank: Member Joined: 3/17/2009 Posts: 201
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The world’s biggest talent-killers are parents, teachers, organisations and mortgages.
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Rank: Hello Joined: 12/18/2014 Posts: 5
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Mr. X earns the same as Mr. Y and living in a rented apartment paying KSh. 45,000 pm. In 20 years, he will have thrown away more than KSh. 12m (in rent payments factoring annual increments).
Mr. Y has taken a 20yrs mortgage of KSh. 6m @11% interest rate, with a monthly repayment of 62,000. His monthly mortgage repayment is 17,000 more than Mr. X’s rent; implying after 20yrs, he will have spent 4.1m more than Mr. X.
20 years later, Mr. Y has a house he bought at 6m using the banks money and probably worth 20m by then, (his capital gain more than his friends spend on rent), and having spent only 4.1m more than Mr. X, while his colleague owns nothing after spending more than 10m.
Who is the wise investor here? Do the calculations and plse don't put your Maths teacher to shame. Mortgage is not the worst decision ever. You use other people’s money to cut on rental losses and the capital gain shall all be yours. Select your location wisely to maximize the returns.
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