Tenant purchase scheme vs mortgage

Nairobi; Kenya: To some people, tenant purchase schemes (TPS) may sound like taking a mortgage. But the two are different. For one, the requirements under a tenant purchase scheme are not as stringent and detailed as those of a mortgage.

The approval process for TPS is simpler and faster, sometimes taking only two weeks. Approval for a mortgage application, on the other hand, could take as long as 90 days due to registration of charge.

Furthermore, the cost of borrowing under TPS is lower than a mortgage and is on a reducing balance basis. And should you default, the foreclosure deadlines are flexible, with several warning letters coming before a public advert with a notice period. This is unlike a mortgage where demand letters are issued and followed swiftly by litigation

One can also easily sell off one’s house under TPS because getting the developer's consent and change of records is faster. With a mortgage, the process takes longer due to various consents and 'discharge of charge' against titles.

Finally, in a TPS arrangement, the buyer enjoys a grace period - this is the period between payment of the deposit and when the house is ready for occupation.

There is yet another grace period between receiving the letter of occupation and starting to pay the monthly installments. Normally, one is given about a month before interest starts accruing.

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