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Is Taking a Mortgage the WORST Decision Ever??
Rank: Member Joined: 5/6/2008 Posts: 199
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However, the installment period is often longer than it would take to process a mortgage. I've seen projects offering installments for periods of a year or more while processing a mortgage could take a month at best, probably more if you have issues come up
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Rank: Elder Joined: 7/22/2009 Posts: 7,842
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webish wrote:tandich wrote:WHy do developers charge mortgage buyers more compared to cash buyers? This on top of the onerous fees one has to part with in arranging a mortgage. I would have expected cash buyers to pay more since they have the option of spreading their purchase price over several installments. NEVER EVER. It's always been about Time value...for that money. As a developer, the best situation would be that, everyone buys cash. Mortgage process takes time, and costs.. That said...on some projects, the difference can be so big, that it becomes a way of saying "CASH BUYERS ONLY"... Some differences are just plain ridiculous!!! Cash Buyers 6.5m Mortgage Buyers 8m 1.5m for what??? Are you the one giving the mortgage. You will get your money in cash after all. A couple of months you want to make an extra 1.5m? And even by then the cash buyers will probably have not paid everything especially if they took up possession after the mortgage buyer! Don't you think the mortgage buyer is already shafted enough?? Someone explain to me like a two year old, what extra costs (other than time) does the vendor or developer incur if the buyer is buying through mortgage? 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 wrote:webish wrote:tandich wrote:WHy do developers charge mortgage buyers more compared to cash buyers? This on top of the onerous fees one has to part with in arranging a mortgage. I would have expected cash buyers to pay more since they have the option of spreading their purchase price over several installments. NEVER EVER. It's always been about Time value...for that money. As a developer, the best situation would be that, everyone buys cash. Mortgage process takes time, and costs.. That said...on some projects, the difference can be so big, that it becomes a way of saying "CASH BUYERS ONLY"... Some differences are just plain ridiculous!!! Cash Buyers 6.5m Mortgage Buyers 8m 1.5m for what??? Are you the one giving the mortgage. You will get your money in cash after all. A couple of months you want to make an extra 1.5m? And even by then the cash buyers will probably have not paid everything especially if they took up possession after the mortgage buyer! Don't you think the mortgage buyer is already shafted enough?? Someone explain to me like a two year old, what extra costs (other than time) does the vendor or developer incur if the buyer is buying through mortgage? The mortgage seeking process is fraught with risk for the developer: e.g. the amount approved may not be equal to the difference needed; the many bureaucratic steps that must be processed (valuation, registration of title, registration of charge - each with numerous back-and-forth between lawyers, vendor and purchaser). There are numerous potential causes of delays The time value of money cannot be gainsaid: for every 10m tied out, the developer is probably paying interest at 15% p.a. which effectively translates to Kshs 1.5m p.a., then add the premium on the delays and inconveniences of entrepreneurship. With experience, a developer learns that the delay between sale agreement and full draw-down is often >8 months; often lasting beyond a year.
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Rank: Member Joined: 2/20/2007 Posts: 767
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kiwaru wrote:MaichBlack wrote:webish wrote:tandich wrote:WHy do developers charge mortgage buyers more compared to cash buyers? This on top of the onerous fees one has to part with in arranging a mortgage. I would have expected cash buyers to pay more since they have the option of spreading their purchase price over several installments. NEVER EVER. It's always been about Time value...for that money. As a developer, the best situation would be that, everyone buys cash. Mortgage process takes time, and costs.. That said...on some projects, the difference can be so big, that it becomes a way of saying "CASH BUYERS ONLY"... Some differences are just plain ridiculous!!! Cash Buyers 6.5m Mortgage Buyers 8m 1.5m for what??? Are you the one giving the mortgage. You will get your money in cash after all. A couple of months you want to make an extra 1.5m? And even by then the cash buyers will probably have not paid everything especially if they took up possession after the mortgage buyer! Don't you think the mortgage buyer is already shafted enough?? Someone explain to me like a two year old, what extra costs (other than time) does the vendor or developer incur if the buyer is buying through mortgage? The mortgage seeking process is fraught with risk for the developer: e.g. the amount approved may not be equal to the difference needed; the many bureaucratic steps that must be processed (valuation, registration of title, registration of charge - each with numerous back-and-forth between lawyers, vendor and purchaser). There are numerous potential causes of delays The time value of money cannot be gainsaid: for every 10m tied out, the developer is probably paying interest at 15% p.a. which effectively translates to Kshs 1.5m p.a., then add the premium on the delays and inconveniences of entrepreneurship. With experience, a developer learns that the delay between sale agreement and full draw-down is often >8 months; often lasting beyond a year. Having said that, buying off- plan for cash is also very risky for the buyer. 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: Member Joined: 10/19/2009 Posts: 671 Location: Nairobi
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tom_boy wrote:kiwaru wrote:MaichBlack wrote:webish wrote:tandich wrote:WHy do developers charge mortgage buyers more compared to cash buyers? This on top of the onerous fees one has to part with in arranging a mortgage. I would have expected cash buyers to pay more since they have the option of spreading their purchase price over several installments. NEVER EVER. It's always been about Time value...for that money. As a developer, the best situation would be that, everyone buys cash. Mortgage process takes time, and costs.. That said...on some projects, the difference can be so big, that it becomes a way of saying "CASH BUYERS ONLY"... Some differences are just plain ridiculous!!! Cash Buyers 6.5m Mortgage Buyers 8m 1.5m for what??? Are you the one giving the mortgage. You will get your money in cash after all. A couple of months you want to make an extra 1.5m? And even by then the cash buyers will probably have not paid everything especially if they took up possession after the mortgage buyer! Don't you think the mortgage buyer is already shafted enough?? Someone explain to me like a two year old, what extra costs (other than time) does the vendor or developer incur if the buyer is buying through mortgage? The mortgage seeking process is fraught with risk for the developer: e.g. the amount approved may not be equal to the difference needed; the many bureaucratic steps that must be processed (valuation, registration of title, registration of charge - each with numerous back-and-forth between lawyers, vendor and purchaser). There are numerous potential causes of delays The time value of money cannot be gainsaid: for every 10m tied out, the developer is probably paying interest at 15% p.a. which effectively translates to Kshs 1.5m p.a., then add the premium on the delays and inconveniences of entrepreneurship. With experience, a developer learns that the delay between sale agreement and full draw-down is often >8 months; often lasting beyond a year. Having said that, buying off- plan for cash is also very risky for the buyer. Yes. Very. Installments are much better for cash buyers. But this would only apply for "off-plan" purchases.
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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Having gone the mortgage way for my dwelling place, having "suffered" through the lengthy processes (8 months), having paid 98% of my monthly installments as interest, having paid numerous "frivolous" costs to lawyers, banks, etc, I now with experience and some ??wisdom advice this:
1. Go cash if you can. But strive to get a house, even if through the 'ulcerous' mortgage way
2. Avoid off-plans. Even from reputable firms. Unless the sale agreement has a penalty clause on the developer for delays, refunds, etc. Otherwise they will refund your 50% deposit money after 3 years
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Rank: Member Joined: 10/19/2009 Posts: 671 Location: Nairobi
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kiwaru wrote:Having gone the mortgage way for my dwelling place, having "suffered" through the lengthy processes (8 months), having paid 98% of my monthly installments as interest, having paid numerous "frivolous" costs to lawyers, banks, etc, I now with experience and some ??wisdom advice this:
1. Go cash if you can. But strive to get a house, even if through the 'ulcerous' mortgage way
2. Avoid off-plans. Even from reputable firms. Unless the sale agreement has a penalty clause on the developer for delays, refunds, etc. Otherwise they will refund your 50% deposit money after 3 years
Wise words..Thank You. I think sometimes, loosing a % of your Deposit is better than sticking out to the end, esp when you clearly see how development is progressing? So - if Off-Plan, looks like it's best to pay a Max of the Deposit required (whether cash/mortgage buyer). Hm.
Life is joy, death is peace, but the transition is very difficult.
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Rank: Elder Joined: 3/18/2011 Posts: 12,069 Location: Kianjokoma
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kiwaru wrote:Having gone the mortgage way for my dwelling place, having "suffered" through the lengthy processes (8 months), having paid 98% of my monthly installments as interest, having paid numerous "frivolous" costs to lawyers, banks, etc, I now with experience and some ??wisdom advice this:
1. Go cash if you can. But strive to get a house, even if through the 'ulcerous' mortgage way
2. Avoid off-plans. Even from reputable firms. Unless the sale agreement has a penalty clause on the developer for delays, refunds, etc. Otherwise they will refund your 50% deposit money after 3 years
Asante
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Rank: Member Joined: 2/20/2007 Posts: 767
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kiwaru wrote:Having gone the mortgage way for my dwelling place, having "suffered" through the lengthy processes (8 months), having paid 98% of my monthly installments as interest, having paid numerous "frivolous" costs to lawyers, banks, etc, I now with experience and some ??wisdom advice this:
1. Go cash if you can. But strive to get a house, even if through the 'ulcerous' mortgage way
2. Avoid off-plans. Even from reputable firms. Unless the sale agreement has a penalty clause on the developer for delays, refunds, etc. Otherwise they will refund your 50% deposit money after 3 years
My thoughts, avoid cash buying unless the construction is essentially complete. Otherwise, ensure your cash payments are tied to certain tangible progress on the construction ( if paying in instalments). If these two not applicable, I would rather pay minimum deposit and apply for a mortgage. In fact, lodge the cash with the bank say in a fixed deposit account and apply for a mortgage worth the difference between the cash price and mortgage price. That way, you lock in your price at beginning of construction while risking only the initial 10% deposit. 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: Member Joined: 10/26/2011 Posts: 181 Location: Nairobi
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kiwaru wrote:kiwaru wrote:Realtreaty wrote:It has proved to be the worst. Funny to hear that 60 to 80 % do not seek funds from Banks.
Kenyans destate those unforeseen rules and costs (Insurance for loan, collateral, fees and commisions, high interest to repay,penalties etc)
Now lets see, barclays has declared it will fund upcountry projects!!!
I agree. The terms and conditions are quite the bother, and not so predictable, even nonsensical. Valuation fees, arrangement fees, legal fees, insurance: all applied separately on top of the interest payments and often deducted separately. This happens after you have signed the sale agreement with penalty clauses if you should think of withdrawing. For my next project, am considering NOT taking bank financing. Budget is 20M, constrution of multiple units (estimated RoR of 25% gross, on un-encumbered land, so am wondering what my options are... Typical scenario: Take a mortgage for 13 milli, raise 3m and ask the bank for 10 milli, utalipishwa 1. Valuation - 30,000 (there's some scale applied) 2. Vendor's lawyer - 175,000 (for registration etc) 3. Your own lawyer - 50,000 - 100,000 (kulingana na how friendly s/he is) 4. Bank's lawyers - 150,000 (to register charge etc) 5. Arrangement fee ya bank - 110,000 Total = minimum Kshs 510,000 Na hiyo ni kabla ya stamp duty na zingine sikumbuki another 4.4% inakuja 450,000. Na insurance (to cover the bank, not you - 65,000 charged per annum ) Ni hujuma, ni hujuma, ni hujuma ....   !!! Kweli mambo ya mortgage ni mazito Jamhuri Kwetu. Mimi hapa Majuu, I just acquired a second home mortgage and my costs were as follows: Downpayment $11,500. The other costs (closing costs of about $6,500 were partly met by the seller and by my lender who had a closing cost promotion if I used certain referrals). My rate is 2.6% pa for the 1st 5 years and can only vary between 1% and 4.6% in the next five years (yes it is called an ARM). The toughest process is finding a home to buy rather than the financing (if your credit score meets or exceeds the requirements). First time in history we can save the human race by laying in front of the TV and doing nothing. Let's not screw it up
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