Tuesday, April 16, 2024

Is using your monthly salary to build a house a wise decision?

A Tiktoker known as Nguea Dipita has highly discouraged aspiring homeowners from using their income to build a residential house.

He narrated how an incomplete structure was abandoned in his neighbourhood by its owner, who had started building since he was in primary school.

According to Dipita, the construction of the mansion stalled because the owner relied on an active income, which diminished before he could complete the house.

”A residential house is a liability. Never use an active income to buy liabilities. It is a very costly mistake you can ever make,’’ he said, questioning the millions of shillings that have been buried in the said structure.

Another user echoed Dipita’s sentiments, noting that he was forced to sell his incomplete house after running out of funds.

“This happened to me in 2011. I ended up selling the house. To this day, I still think about that mistake,” he said.

Fredrick Kihu, a Kenyan homeowner, also narrated how he struggled to complete his house due to a lack of funds. In an interview with Kevin Gitau on NTV, Kihu revealed he was forced to move into an incomplete house.

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While his plan was to build a four-bedroom house, a lack of funds forced him to modify a section of the house for his family to live in.

”It was my dad who gave me that idea. He advised that we live in one section of the house as we finish the rest slowly. Actually, that’s what propelled me to go ahead,’’ he said.

Kihu revealed he later approached a bank for funding to complete the project. He advised aspiring homeowners to have a viable house construction plan before implementing the project.

Christine Gathiuni, a financial advisor at Precious Connections Ltd., advises homeowners to resist the urge to construct houses with their salaries unless they have an extra source of income.

One can instead opt for loans from financial institutions which can be convenient. Co-op Bank, for instance, offers one of the cheapest homeownership loans in Kenya.

The bank gives loans of between Sh500,000 to Sh8 million at an interest rate of 9.9 percent, reducing balance, making it the cheapest home ownership lender in Kenya.

“Affordable housing loans are now available to customers for the purchase of developed residential homes as well as to undertake plot buy and build for residential homes,” said Co-op Bank in a statement to Bizna Kenya.

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“Whether you’re buying or building, we’ve got you covered with loans from Sh. 500,000 up to Sh. 8 million. Additionally, as a Co-op Bank customer, you can enjoy up to 90 percent financing for building and 100 percent for ready-built homes,” it added.

There is no security needed, as the bank uses the property under purchase as security for the loan. All one is required to have is a maximum household gross income of Sh. 150,000 and at least six months of consistent banking with the Co-op Bank.

“The maximum loan tenure is 15 years for employed applicants and 10 years for self-employed applicants,” said Co-op Bank.

The bank also offers a Mortgage product that covers 95 percent of the mortgage value, enabling home buyers to own their houses easily.

This loan product allows customers to enjoy affordable installments with a repayment period of up to 20 years and a grace period of six months.

To qualify for the loan, Co-op Bank requires borrowers to present the following:

  • Copies of identification documents, that is, Memorandum and Articles of Association as well as a Certificate of Incorporation (for registered companies)
  • Business Registration Certificate
  • Identity cards for borrowers who do not have registered businesses
  • Identity cards for directors of registered companies and registered businesses
  • Bank statements for 6 months
  • Audited accounts for loans above Ksh 5 million
  • Resolution to borrow (for registered companies) and details of business location
  • Necessary approvals by City Council, the local authorities, NEMA and securities to be provided

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The features of the loan are:

  • Competitive interest rates
  • Affordable installments with a repayment period of up to 20 years
  • A moratorium (grace period) of six months
  • The house you purchase can be used as collateral, and its rental income can be used to repay the loan

Why Co-op bank mortgage loan?

The facility has an upfront disclosure of all processes involved and charges for the customer’s benefit.

Co-op Bank also offers variable and fixed rolling mortgages, allowing customers to choose the interest regime that is best for them.

In addition, the bank has redefined turnkey projects to also include individuals who team up and wish to construct houses under structured projects for owner-occupation.

To access these cheap loans from Co-op Bank, you can visit your nearest Co-op Bank branch or give Co-op Bank a call via:  0711049739 or 0711049811, or email [email protected] for more details.

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