President William Ruto’s initiative to provide decent housing for low-income earners has been in the spotlight recently. His administration aims to construct approximately 250,000 low-cost housing units annually. However, this plan has raised concerns due to the challenges faced by low- to mid-income workers in accessing the country’s limited home loans market.
In 2022, the average mortgage size was Sh9 million with an average interest rate of 12.3%, making it difficult for many workers to afford. Kenya Mortgage Refinance Company (KMRC), established in 2020 as a partnership between the Treasury and private lenders, was assigned the crucial task of reducing risk in the mortgage market and assisting workers earning a monthly income of Sh150,000 and below to access home loans.
To achieve this goal, KMRC mobilizes and provides long-term funds to participating banks, saccos, and microfinance institutions, which, in turn, offer loans to potential homebuyers. The primary lenders can access funds at a low interest rate of five percent and are expected to lend to customers at single-digit interest rates, offering repayment periods of up to 25 years.
This proactive approach aims to bridge the gap in the housing market and enable low-income earners to realize their dream of owning a home, contributing to a more inclusive and sustainable housing sector in the country.
Opening Doors to Affordable Housing: Qualifications for State-Backed Home Loans
KMRC (Kenya Mortgage Refinance Company) offers subsidized loans to any Kenyan, especially those with lower monthly incomes. If you earn no more than Sh150,000, you are considered a low-income earner and eligible to apply for the KMRC-backed loan through your mortgage provider. While the loan is available to a wide range of individuals, priority is given to first-time home buyers.
This initiative aims to make homeownership more accessible to the Kenyan population, particularly those who may have faced challenges in securing conventional loans due to their income levels. By providing subsidized loans and prioritizing first-time home buyers, KMRC seeks to empower more Kenyans to fulfill their dream of owning a home and contribute to a thriving and inclusive housing market.
A Step-by-Step Guide to Applying for a Home Loan under KMRC Framework
To own a house through KMRC, the State-backed refinancier that aims to make homeownership accessible to low- and middle-income earners, the first step for any prospective homebuyer is to identify a house that fits within their monthly income. Once you’ve found the perfect home, approach any of the banks or saccos participating in the KMRC plan to apply for a home loan to finance the purchase. The bank or sacco you choose will be your primary mortgage provider.
Currently, several commercial banks are part of the KMRC arrangement, including KCB, NCBA, Co-operative, Absa, DTB, Stanbic, HF Group, and Credit Bank. Additionally, various saccos such as Stima, Mwalimu, Harambee, Unaitas, Kenya Police, Bingwa, Imarika, Safaricom, Ukulima, Tower, and Imarisha are also participating in the KMRC home ownership plan.
Furthermore, for those considering a microfinance option, Kenya Women Microfinance Bank (KWFT) is the sole microfinancier participating in the KMRC plan, offering opportunities for aspiring homeowners to realize their dreams.
By collaborating with reputable lenders, KMRC aims to derisk the mortgage market and create pathways to homeownership for individuals with diverse income levels. If you’re looking to own a house, take advantage of the KMRC program through any of these esteemed partners and turn your dream of homeownership into a reality.
Building Your Dream Home with KMRC: Financing Options for Construction on Your Own Land
KMRC offers financing that supports borrowers in constructing their own homes. If you opt for this option, the financial institution you choose to work with (whether it’s a bank, sacco, or microfinancier) will provide a construction loan that qualifies as a home loan. This loan will come with a well-defined implementation plan and a specified period for the construction process.
This approach empowers individuals to take charge of building their dream homes, making it a practical and viable solution for those who have specific preferences or unique requirements in their homes. With the support of KMRC and the participating financial institution, you can embark on the journey of building your own home with confidence and ease.
Empowering Your Vision: KMRC’s Land Refinancing Solutions for Your Dream Home Construction
The firm offers funding for such proposals through its ‘buy and build’ offering.
In simpler terms, the company provides financial support for projects where individuals or developers buy land and then proceed to build their desired structures on that land. This ‘buy and build’ option allows for more flexibility and customization in the construction process, making it an attractive choice for those looking to create their dream homes or specific projects.
Is the Informal Sector Covered by KMRC?
We noticed that there wasn’t a product specifically designed for prospective home buyers with irregular income. In response to this concern, KMRC is taking steps to facilitate an alternative credit assessment mechanism. This mechanism aims to help individuals without a regular income to demonstrate their ability to service a mortgage effectively.
By implementing this approach, KMRC is providing support to borrowers in the informal sector, allowing them to realize their dream of owning homes in an affordable manner. This innovative solution opens up new possibilities for individuals with irregular income, ensuring that they too can access home loans and achieve their homeownership goals with confidence.
Understanding KMRC’s Refinancing Criteria: Factors That May Affect Approval of Your Home Loan Application
KMRC has highlighted that some common cases where refinancing has not been approved involve applicants whose monthly income cannot adequately support the repayment of the home loan for the property they have chosen. To ensure affordability and accessibility, KMRC funds the purchase of houses valued at a maximum of Sh8 million within the Nairobi metropolitan area, including Kiambu, Machakos, and Kajiado counties. For properties in the rest of the country, the maximum value for financing is set at Sh6 million.
Let’s consider an example for a Sh5 million property. A prospective home buyer should be able to repay approximately Sh43,700 per month for 25 years, considering KMRC’s average interest rate of 9.5 percent. For a Sh3 million house, the monthly repayment would be around Sh26,300, applying the same tenure and interest rate.
Additionally, it’s essential to note that houses built on properties that do not conform to the environmental and social impact criteria approved by the National Environment Management Authority (Nema) would also not be eligible for refinancing. Such criteria are typically concerned with preserving heritage sites, avoiding flood-prone areas, and protecting road reserves.
These strict rules align with the standards set by the World Bank Group and the African Development Bank (AfDB), who are the primary financiers of KMRC. By adhering to these standards, KMRC ensures responsible and sustainable lending practices, safeguarding the interests of both borrowers and the environment.
Unlocking Your Homeownership Journey: Exploring the Upfront Costs to Secure a Home Loan
This is commonly referred to as the loan-to-value (LTV) ratio. In most cases, commercial mortgage lenders allow a maximum LTV of 90 percent. This implies that a prospective buyer needs to raise and deposit at least 10 percent of the property’s value as a down payment to qualify for a home loan.
However, KMRC takes a more flexible approach and offers a loan-to-value ratio of up to 105 percent. This means that buyers can access financing beyond the property’s value, enabling them to cover additional expenses such as legal fees and stamp duty. Johnstone Oltetia, the Chief Executive of KMRC, explains that some individuals desire to own a home but struggle to raise the required deposit. To address this, KMRC has removed this rigidity and increased the LTV ratio, allowing borrowers to receive a loan that exceeds the house’s value by 5 percent. This additional amount covers the incidental costs associated with buying a property, including legal fees and valuation expenses.
In practical terms, this means that the bank not only provides the funds for buying the house but also includes the necessary finances to cover incidental costs. As a result, there are no barriers preventing individuals from realizing their dream of owning a home, as KMRC’s accommodating approach offers an inclusive and accessible pathway to homeownership.
Empowering Workers in Homeownership: KMRC’s Supported Housing Options
KMRC states that when a buyer finds an “affordable home” that has been constructed either through a government program or by a private developer, KMRC will offer end user financing to facilitate the purchase of the house.
In simpler terms, if you come across a home that fits your budget and is considered affordable, and it was built as part of a government initiative or by a private developer, KMRC will be there to provide the necessary financial support for you to buy that home. This enables you to realize your dream of homeownership with ease and confidence, as KMRC aims to make the process of purchasing a home more accessible and attainable for all.
