Mortgage in the Kenyan real estate market is a touchy subject. One of the primary reasons is that given the reverence with home ownership is held in Kenya, mortgages don’t come cheap. They are very expensive and come with very lengthy repayment periods of up to 25 years… sometimes 30 years.

But is taking one of these mortgage loans worth it? The answers to this question vary. In one perspective, Dr Mumo Muinde, the author of The Art of Money & Wealth Creation argues that mortgages in the Kenyan market are a very bad idea. He goes on to state that so bad is this idea that taking a mortgage and binding yourself to repayment contract for 15 to 25 years is a true definition of slavery.

What brings about this conclusion? Well, Dr Muinde listed several reasons as listed below on why he made this conclusion. Do you agree with him that taking a mortgage in Kenya is such a bad idea?

Did you know…Mortgage Originally meant a Death Pledge? Overall, a Mortgage might be a very bad financial idea in Kenya for the following reasons:

1). Interest rates in Kenya are very high – according to a Policy Brief by the Kenya Mortgage Refinance Company, the average mortgage rate in Kenya was 14.3 percent in 2023. A mortgage loan at this rate is crazy even for commercial buildings because very few properties make enough money to cover the loan interest, principal and other transaction costs;

2). Many housing properties are overpriced -most of corrupt, wash-wash and drug money in Kenya is cleaned through housing. This has distorted the supply and demand, making housing unnecessarily too expensive. It thus makes it very difficult to make a profit from such a distorted market;

3). Lack of credible or overrated value drivers – it is shocking how many people think simply because a road, SGR or other public infrastructure has been done in an area it automatically translates into value improvements for land and housing. Property values only grow because of underlying economic activity, not merely because the infrastructure has been done;

4). Many ignorant buyers and herding mentality – Kenya has proved notorious for get-rich-quick schemes. If people can sink billions in pyramid schemes and phony things like quail farming without asking questions, it means the same things also happen in real estate, especially with the perceptions there is some easy money in land and housing. Many ignorant buyers distort the housing market;

5). Length of Mortgage loans – locking yourself for a 15-25 year loan contract is a true definition of slavery. The only person making money or gaining here is the lender, not the borrower. It is that simple.

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6). Confusing cultural issues or emotional decisions with money – for many people, owning a house is the ultimate financial freedom, simply because they are no longer paying rent. This belief removes common sense and logic in evaluating the mortgage contract terms;

7). False belief that you can never go wrong with properties – this is the biggest and most foolish lie many people naively believe in. There is no sector in the economy that is risk proof or where people forever keep making money; and

8). Foolish belief ‘nitaachia wototo nyumba‘ – the easiest way to understand the foolishness in this is: Are you yourself living in your father’s/mother’s house? What makes you think that your children would want to live in your house then?

As I conclude, are you surprised on the number of people and properties been auctioned every week across the country? Does it surprise you that majority of retirees find all they owned is only the house and they cannot maintain it once out of active employment or work?