Before signing a mortgage contract form, lenders often have stringent requirements that must be fulfilled.
A prospective homebuyer must first deposit with them between ten and 20 per cent of the price of the house before other charges creep in.
Often, the valuation fees are charged between 0.25 per cent to 0.5 per cent of the market value of the property.
Interestingly, some banks even levy mortgage applicants negotiation fees at one per cent of the loan, so a mortgage of Sh15 million attracts negotiation fees of Sh150,000!
Others are legal fees on transfer and charge each at between 0.5 to 1.5 per cent of the property value and loan value respectively.
Stamp duty is charged at four per cent of the value of the property, so a house valued at Sh15 million attracts revenue of Sh600,000!
Stamp duty on the charge is levied at 0.1 per cent of the loan and fire policy of 0.15 per cent of the insured amount.
Furthermore, mortgage protection covers are levied at between 0.3 and 0.6 per cent of the loan amount annually.
Consequently, applying for a mortgage to buy an Sh15 million house would drag in hidden charges of up to ten per cent — a cool Sh1.5 million. With this amount you can get a plot in a relatively middle class area in many towns in Kenya.
Legally, mortgage applicants who wholly rely on staff advisors of banks for advice and take it as gospel truth could be digging their financial graves.
As caution, it is prudent to engage your own lawyer to go through the mortgage application forms and contracts before appending your signature.
Others are a letter from your employer confirming employment status — terms and retirement age —and bank statements for the latest six months.