Wazua
»
Investor
»
Property
»
Affordable mortgage, can this work?
Rank: Member Joined: 6/17/2010 Posts: 572
|
so a relation of mine in the UK just put pen to paper on a 400k pound 3 bed roomed house in London where the owner of the house has agreed to a share ownership scheme financed through a mortgage, here's how it works; The lease holder or owner puts up the house for sale in bits of 25%, 50%, 75% and 100% The buyer then takes out a mortgage to finance the 25% of the house's value and occupies the house and also pays monthly rent to the owner but at a much lower amount compared to the prevailing rental rates for the property When the buyer finishes mortgage repayments on the 25% he/she owns 25% of the house, now at this stage buyer can remortgage for the next 25% to take his/her ownership to 50% and subsequently to 75% and 100% respectively, all this while continuing to pay the reduced rent till the buyer gets to 100% and the house is fully owned by the buyer. In the event that the buyer wishes to opt out of the deal, the seller will sell the house to a third party and the buyer will get back his percentage share of the house from the seller but not the rent already paid. This if adopted in Kenya can make housing affordable and it can work well for developers of low cost housing. Is there a developer or a company offering a similar scheme in Kenya? 'One headache for famous medieval holy people was that someone might murder you to acquire your body parts for the relics trade'
|
|
|
Rank: Elder Joined: 6/2/2011 Posts: 4,818 Location: -1.2107, 36.8831
|
With my little knowledge in property finance, i would still insist that an affordable mortgage is one that the interest rate is single digit. Anything else is just BEATING around the bush. Receive with simplicity everything that happens to you.” ― Rashi
|
|
|
Rank: Elder Joined: 6/23/2009 Posts: 13,520 Location: nairobi
|
I already shared such an offer right here on wazua and got one interested partner. It is working for me.. www.wazua.co.ke/forum.as...osts&t=16734&p=8
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
|
|
|
Rank: Veteran Joined: 1/4/2010 Posts: 1,668 Location: nairobi
|
For the kenyan market, its easier to devide the house into smaller units then let buyers work with personal loans plus savings to invest with. Personal loans are easier to obtain and most people have some savings. This is the basis of the financing for the southern sunshine hotel here http://www.a4architect.c...ng-the-southern-bypass/
Hotel rooms are small units which are affordable and give high returns. The other option of bank loans will make the hotel rooms expensive in the long run hence unreachable/unafordable to many. As Iron Sharpens Iron, So one Man Sharpens Another.
|
|
|
Rank: Elder Joined: 5/21/2013 Posts: 2,841 Location: Here
|
vky wrote:so a relation of mine in the UK just put pen to paper on a 400k pound 3 bed roomed house in London where the owner of the house has agreed to a share ownership scheme financed through a mortgage, here's how it works;
The lease holder or owner puts up the house for sale in bits of 25%, 50%, 75% and 100%
The buyer then takes out a mortgage to finance the 25% of the house's value and occupies the house and also pays monthly rent to the owner but at a much lower amount compared to the prevailing rental rates for the property
When the buyer finishes mortgage repayments on the 25% he/she owns 25% of the house, now at this stage buyer can remortgage for the next 25% to take his/her ownership to 50% and subsequently to 75% and 100% respectively, all this while continuing to pay the reduced rent till the buyer gets to 100% and the house is fully owned by the buyer.
In the event that the buyer wishes to opt out of the deal, the seller will sell the house to a third party and the buyer will get back his percentage share of the house from the seller but not the rent already paid.
This if adopted in Kenya can make housing affordable and it can work well for developers of low cost housing.
Is there a developer or a company offering a similar scheme in Kenya?
Does the rent so paid go towards offsetting part of the mortgage repayments? Life is like playing a violin solo in public and learning the instrument as one goes on.
|
|
|
Rank: Member Joined: 6/17/2010 Posts: 572
|
similar concept but method and execution is inverse of what you have but its all good we need such strategies to make property affordable. @a4architect, my thoughts exactly, using a personal loan as opposed to a mortgage would work well, say, @obiero decides to sell his nyayo estate house at 6m, @vky is interested in the house but can not meet the requirements of a 6m mortgage but has access to a personal loan facility of upto 2m, vky can opt to buy 25% of obiero's house for 1.5m and also pay obiero a monthly reduced rent of 14000 if the normal rental rates are 28000, vky clears the personal loan in five years then takes out another personal loan to buy the next 25% till he gets to fully owning the house. this arrangement would last 20yrs or less with obiero getting 1.5m every 5 years plus reduced rental yield over the entire tenure of the agreement 'One headache for famous medieval holy people was that someone might murder you to acquire your body parts for the relics trade'
|
|
|
Rank: Member Joined: 6/17/2010 Posts: 572
|
Rankaz13 wrote:vky wrote:so a relation of mine in the UK just put pen to paper on a 400k pound 3 bed roomed house in London where the owner of the house has agreed to a share ownership scheme financed through a mortgage, here's how it works;
The lease holder or owner puts up the house for sale in bits of 25%, 50%, 75% and 100%
The buyer then takes out a mortgage to finance the 25% of the house's value and occupies the house and also pays monthly rent to the owner but at a much lower amount compared to the prevailing rental rates for the property
When the buyer finishes mortgage repayments on the 25% he/she owns 25% of the house, now at this stage buyer can remortgage for the next 25% to take his/her ownership to 50% and subsequently to 75% and 100% respectively, all this while continuing to pay the reduced rent till the buyer gets to 100% and the house is fully owned by the buyer.
In the event that the buyer wishes to opt out of the deal, the seller will sell the house to a third party and the buyer will get back his percentage share of the house from the seller but not the rent already paid.
This if adopted in Kenya can make housing affordable and it can work well for developers of low cost housing.
Is there a developer or a company offering a similar scheme in Kenya?
Does the rent so paid go towards offsetting part of the mortgage repayments? no it doesn't, the purpose of that is to make it worthwhile for the seller to wait for five years to receive his next lump sum 'One headache for famous medieval holy people was that someone might murder you to acquire your body parts for the relics trade'
|
|
|
Rank: Veteran Joined: 12/23/2010 Posts: 1,229
|
vky wrote:Rankaz13 wrote:vky wrote:so a relation of mine in the UK just put pen to paper on a 400k pound 3 bed roomed house in London where the owner of the house has agreed to a share ownership scheme financed through a mortgage, here's how it works;
The lease holder or owner puts up the house for sale in bits of 25%, 50%, 75% and 100%
The buyer then takes out a mortgage to finance the 25% of the house's value and occupies the house and also pays monthly rent to the owner but at a much lower amount compared to the prevailing rental rates for the property
When the buyer finishes mortgage repayments on the 25% he/she owns 25% of the house, now at this stage buyer can remortgage for the next 25% to take his/her ownership to 50% and subsequently to 75% and 100% respectively, all this while continuing to pay the reduced rent till the buyer gets to 100% and the house is fully owned by the buyer.
In the event that the buyer wishes to opt out of the deal, the seller will sell the house to a third party and the buyer will get back his percentage share of the house from the seller but not the rent already paid.
This if adopted in Kenya can make housing affordable and it can work well for developers of low cost housing.
Is there a developer or a company offering a similar scheme in Kenya?
Does the rent so paid go towards offsetting part of the mortgage repayments? no it doesn't, the purpose of that is to make it worthwhile for the seller to wait for five years to receive his next lump sum Payment of rent done on a pro rata basis. If the buyer has paid 25%, his rent is reduced by a similar percentage so that he pays 75%. Excellent model since it allows the buyer to pace himself.
|
|
|
Rank: Member Joined: 6/17/2010 Posts: 572
|
For Sport wrote:vky wrote:Rankaz13 wrote:vky wrote:so a relation of mine in the UK just put pen to paper on a 400k pound 3 bed roomed house in London where the owner of the house has agreed to a share ownership scheme financed through a mortgage, here's how it works;
The lease holder or owner puts up the house for sale in bits of 25%, 50%, 75% and 100%
The buyer then takes out a mortgage to finance the 25% of the house's value and occupies the house and also pays monthly rent to the owner but at a much lower amount compared to the prevailing rental rates for the property
When the buyer finishes mortgage repayments on the 25% he/she owns 25% of the house, now at this stage buyer can remortgage for the next 25% to take his/her ownership to 50% and subsequently to 75% and 100% respectively, all this while continuing to pay the reduced rent till the buyer gets to 100% and the house is fully owned by the buyer.
In the event that the buyer wishes to opt out of the deal, the seller will sell the house to a third party and the buyer will get back his percentage share of the house from the seller but not the rent already paid.
This if adopted in Kenya can make housing affordable and it can work well for developers of low cost housing.
Is there a developer or a company offering a similar scheme in Kenya?
Does the rent so paid go towards offsetting part of the mortgage repayments? no it doesn't, the purpose of that is to make it worthwhile for the seller to wait for five years to receive his next lump sum Payment of rent done on a pro rata basis. If the buyer has paid 25%, his rent is reduced by a similar percentage so that he pays 75%. Excellent model since it allows the buyer to pace himself. @for sport, exactly! 'One headache for famous medieval holy people was that someone might murder you to acquire your body parts for the relics trade'
|
|
|
Rank: Veteran Joined: 2/3/2010 Posts: 1,797 Location: Kenya
|
vky wrote:similar concept but method and execution is inverse of what you have but its all good we need such strategies to make property affordable. @a4architect, my thoughts exactly, using a personal loan as opposed to a mortgage would work well, say, @obiero decides to sell his nyayo estate house at 6m, @vky is interested in the house but can not meet the requirements of a 6m mortgage but has access to a personal loan facility of upto 2m, vky can opt to buy 25% of obiero's house for 1.5m and also pay obiero a monthly reduced rent of 14000 if the normal rental rates are 28000, vky clears the personal loan in five years then takes out another personal loan to buy the next 25% till he gets to fully owning the house. this arrangement would last 20yrs or less with obiero getting 1.5m every 5 years plus reduced rental yield over the entire tenure of the agreement  after the first five years the house value has gone up so the next 25% is much higher... no savings here I may be wrong..but then I could be right
|
|
|
Rank: Elder Joined: 6/23/2009 Posts: 13,520 Location: nairobi
|
digitek1 wrote:vky wrote:similar concept but method and execution is inverse of what you have but its all good we need such strategies to make property affordable. @a4architect, my thoughts exactly, using a personal loan as opposed to a mortgage would work well, say, @obiero decides to sell his nyayo estate house at 6m, @vky is interested in the house but can not meet the requirements of a 6m mortgage but has access to a personal loan facility of upto 2m, vky can opt to buy 25% of obiero's house for 1.5m and also pay obiero a monthly reduced rent of 14000 if the normal rental rates are 28000, vky clears the personal loan in five years then takes out another personal loan to buy the next 25% till he gets to fully owning the house. this arrangement would last 20yrs or less with obiero getting 1.5m every 5 years plus reduced rental yield over the entire tenure of the agreement after the first five years the house value has gone up so the next 25% is much higher... no savings here investment income would also go up as a result of increased rent.. there is definitely some savings
HF 90,000 ABP 3.83; KQ 414,100 ABP 7.92; MTN 23,800 ABP 6.45
|
|
|
Rank: Elder Joined: 7/22/2009 Posts: 7,455
|
digitek1 wrote:vky wrote:similar concept but method and execution is inverse of what you have but its all good we need such strategies to make property affordable. @a4architect, my thoughts exactly, using a personal loan as opposed to a mortgage would work well, say, @obiero decides to sell his nyayo estate house at 6m, @vky is interested in the house but can not meet the requirements of a 6m mortgage but has access to a personal loan facility of upto 2m, vky can opt to buy 25% of obiero's house for 1.5m and also pay obiero a monthly reduced rent of 14000 if the normal rental rates are 28000, vky clears the personal loan in five years then takes out another personal loan to buy the next 25% till he gets to fully owning the house. this arrangement would last 20yrs or less with obiero getting 1.5m every 5 years plus reduced rental yield over the entire tenure of the agreement after the first five years the house value has gone up so the next 25% is much higher... no savings here The price of the house is agreed on at the beginning and is not changed. If it is 6m you pay 1.5m four times or 2m twice. Seller's benefit? Rent before you finish paying for the house. If rent was 28k, after paying the first 25%, your rent becomes 21k. So you'll pay the seller 21k * 12 * 5 = 180k before you can pay for the next 25% and the cycle goes on and on. This 180k doesn't count as payment for the purchase of the house. It is rent for the 75% of the house you DON'T own! Why this my not work in Kenya. In the west, under normal circumstances (ignoring the property market crash which was a special case), there are no crazy swings in terms of property prizes and rents. In Kenya on the other hand, the prizes of land and houses increases at crazy rates and only a confused property owner would agree to such an arrangement. I'd rather continue getting 100% rent and then sell the house at double the price in a couple of years - lump sum! Win - win! More rent, more lump sum. And in the mean time I would have increased the rent a couple of times. I would NEVER sell my property in Kenya under such an arrangement!! But if there is anyone willing to sell me his property on the same arrangement, bring it on. Even if you quote an above market rate price, I'll still come out as the winner! Any sellers??? Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
|
|
|
Rank: Member Joined: 6/17/2010 Posts: 572
|
digitek1 wrote:vky wrote:similar concept but method and execution is inverse of what you have but its all good we need such strategies to make property affordable. @a4architect, my thoughts exactly, using a personal loan as opposed to a mortgage would work well, say, @obiero decides to sell his nyayo estate house at 6m, @vky is interested in the house but can not meet the requirements of a 6m mortgage but has access to a personal loan facility of upto 2m, vky can opt to buy 25% of obiero's house for 1.5m and also pay obiero a monthly reduced rent of 14000 if the normal rental rates are 28000, vky clears the personal loan in five years then takes out another personal loan to buy the next 25% till he gets to fully owning the house. this arrangement would last 20yrs or less with obiero getting 1.5m every 5 years plus reduced rental yield over the entire tenure of the agreement after the first five years the house value has gone up so the next 25% is much higher... no savings here @digitek when you take a mortgage the bank will not after five years say that since the value of the property has gone up your mortgage repayments also go up, the above is a contract that all the parties involved are agreeable to the terms and the value of the house at the time of contracting will not change however, what will change is the rent payable as determined by market rates less the percentage of ownership 'One headache for famous medieval holy people was that someone might murder you to acquire your body parts for the relics trade'
|
|
|
Rank: Elder Joined: 7/22/2009 Posts: 7,455
|
@digitek1 - There is nowhere in the world one would allow the seller to quote a NEW price for 75% of a property one has already paid 25% for under an older price. It would be a receipe for the mother of all disasters!!! You would be at the mercy of the seller and without much negotiating power. All the seller would need to do is (assuming the original price is 6m) take you 1.5m or 3m and invest it as you are busy paying off the loan + interest + rent. When time comes for the next slice, he (re)values the house ridiculously - say 30m. You either pay up or ask for your 1.5m or 3m back. Either way, you are screwed!! You basically borrowed money for the seller - you pay the interest, he keeps the interest on investment. Tafakari hayo. The seller will then wait for the next sucker and repeat the process. The only way out is to agree on the annual percentage increase on valuation from the onset and work it into the agreement! The seller might not agree to that though if you have the option to back out because if prices crash, all you'll have to do is back out and ask for your money back and go buy a cheaper property. The seller bears all the risk with virtually no protection. This is a tough one for Kenya! Never count on making a good sale. Have the purchase price be so attractive that even a mediocre sale gives good returns.
|
|
|
Wazua
»
Investor
»
Property
»
Affordable mortgage, can this work?
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.
|