Multi-generation mortgages could be the answer to home ownership

May 10, 2016
Multi-generational mortgages are more popular in the United States, the United Kingdom with three or more generations living under the same roof.

NAIROBI, Kenya, May 10 –  A real estate expert is of the view that Kenya is ready for multi-generational mortgages as Kenya mortgages remain stuck at only 22,000 mortgages against a population of 40 million people.

A multi-generational mortgage is the kind of mortgage that doesn’t have to be paid off in the course of your lifetime as the property and the loan is left out to heirs who can choose to continue making the payment or can sell the home to pay off the debt. 

According to Markem Management Limited Managing Director Johnson Mukuha, pushing payments onto children and grandchildren is the only way homeowners can afford homes as house prices hit levels which the average Kenyan worker can never afford.

“Multi-generational living has benefits for all of the generations involved. While the younger generations can save money and get help with childcare, the older generations can also benefit from sharing costs and household tasks,” Mukuha added in an interview with Capital FM Business.

He says improved longevity, combined with higher house prices; make extended loans sensible and viable.

“With the longevity, it will be cheaper to mortgage than to rent, we can do mortgages of up to 60 years,” he suggested.

Multi-generational mortgages are more popular in the United States, the United Kingdom with three or more generations living under the same roof.

This has mainly been driven by economic factors – the squeeze on incomes and jobs, the cost of housing and the pressures of both childcare and eldercare.

However, Cytonn Investments Head of Private Equity Real Estate Shiv Arora is of the opinion multi-generational mortgages could be more costly as people will end up buying a house up to 300 times.

“The mortgages will probably be put in dollars; interest rates will fluctuate every year, it will be a hard sell for this market, “Arora explained.

He says just like banks interest rates are now being published by the regulator, mortgages rates need to be published so as to enhance competitiveness.

According to a real estate report by Cytonn Real Estate, Finance institutions are currently offering mortgages at a rate of 12 percent to 21 percent which remains high relative to income levels in the market.

 “On varying interest rates apartments are affordable at 8 percent with detached housing in all areas at 3 percent except Kahawa,” the report says.

As the interest rate environment is not expected to change in the near future, the report states this will see more people renting as opposed to buying and the Nairobi Metro market remaining a renters market.

Githurai is the most affordable mortgage market requiring a median income between Sh25,000 – Sh50,000 to purchase a house using a mortgage.

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