How 105% Mortgage LTVs Work in Kenya

For many Kenyans, saving for a down payment on a home can be a significant barrier to homeownership. Traditional mortgages often require an upfront payment of 10% to 20% of the property’s value, which can take years to save. Enter the 105% Loan-to-Value (LTV) mortgage, a game-changing solution that’s making waves in the Kenyan mortgage market.

This innovative product eliminates the need for a hefty deposit and even covers additional costs like legal fees and stamp duty. Here’s everything you need to know about how 105% LTV mortgages work and whether they’re the right choice for you.

What is a 105% Mortgage LTV?

Loan-to-Value (LTV) is a term used to describe the ratio of a loan amount to the value of the property being purchased. For example:

• If your home is valued at Ksh. 10 million and you borrow Ksh. 9 million, your LTV is 90%.

A 105% LTV mortgage goes a step further. It allows you to borrow the entire value of the home (100%) plus an additional 5% to cover costs like:

• Stamp duty.
• Valuation fees.
• Legal fees.
• Other closing costs.

This type of mortgage eliminates the need for upfront savings, making it an attractive option for first-time buyers and those who may not have enough liquidity for a deposit.

How Does it Work in Kenya?

Here’s how a 105% LTV mortgage typically operates:

1. Eligibility Requirements

To qualify, lenders often require:

• A good credit score and repayment history.
• Proof of a stable income, either through employment or business ownership.
• Documentation of the property being purchased, such as title deeds and valuation reports.

2. Loan Terms

• The loan includes 100% of the property value and 5% for associated costs.
• Repayment terms usually range from 10 to 25 years.

3. Property Requirements

• The property must be in an approved location and meet certain quality standards.
• Most lenders prefer the property to be owner-occupied rather than rented out.

Benefits of 105% LTV Mortgages

Why are 105% mortgages gaining popularity?

1. No Deposit Needed
   Buyers can purchase a home without saving for years to cover a deposit.
2. Covers Additional Costs
   Stamp duty, valuation fees, and legal fees are rolled into the loan, reducing the upfront financial burden.
3. Faster Homeownership
   With no need to save for a deposit, you can move into your dream home sooner.

Potential Drawbacks

While these mortgages are convenient, they’re not without risks:

• Higher Total Costs
  Borrowing more means paying higher interest over the loan’s lifetime.
• Risk of Negative Equity
  If property values drop, you could owe more than your home is worth, making it harder to sell or refinance.
• Stringent Approval Process
  Not everyone qualifies for a 105% LTV mortgage, as lenders assess applicants carefully.

Banks Offering 105% Mortgages in Kenya

Some leading banks in Kenya, such as KCB, NCBA, and Stanbic, now offer 105% LTV mortgages. These are often tied to affordable housing programs or new developments, giving buyers more accessible options.

Is a 105% Mortgage Right for You?

A 105% LTV mortgage might be perfect if:

• You’re a first-time buyer struggling with upfront costs.
• You have a stable income and are confident in your ability to manage repayments.
• You’re looking for a convenient, all-inclusive financing solution.

However, if you’re already carrying significant debt or are unsure about your financial stability, it may be wise to explore other options.

Tips for Getting the Most Out of a 105% Mortgage

1. Understand All Costs
   Ask your lender for a detailed breakdown of fees and monthly payments.
2. Compare Lenders
   Different banks may offer varying rates and terms—shop around for the best deal.
3. Budget for the Future
   Remember, homeownership comes with ongoing expenses like maintenance and insurance.

Final Thoughts

A 105% LTV mortgage is a groundbreaking solution for Kenyans looking to overcome the challenges of homeownership. By covering the full cost of the property and additional expenses, it opens the door to homeownership for many who might otherwise be locked out.

Before committing, take time to understand the terms, weigh the pros and cons, and consult with a mortgage advisor to ensure it’s the right fit for your financial situation.

Ready to explore your options? Contact your bank or a mortgage professional today to see if a 105% LTV mortgage is the key to unlocking your dream home!

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