Flexible mortgage plans to suit varying payment cycles

Flexible mortgages are among some of the new mortgage packages that have been created to cater for the modern day mortgage market. The days of a strait jacket approach to mortgage repayments and products are long gone.

Traditionally, it is the salaried employees in the formal sector who have had access to mortgage finance. The premise is that for an economy to grow, the informal sector should occupy a central location not only in the minds of economists but also of financial services providers.

Essentially, a flexible mortgage is paid back in varying amounts. For example, borrowers whose income includes a significant but seasonal income might make use of seasonal payments to make overpayments, thereby reducing the term.

According to statistics, 78 per cent of Kenyans are engaged in the informal sector. Majority of Kenyans in the informal sector fund their own construction depending on their income.

To cater for these groups of entrepreneurial Kenyans, Housing Finance introduced a flexible mortgage product aptly known as the Cyclical Mortgage, which enables Kenyans in the informal sector to apply for mortgage products.

Housing Finance’s Cyclical Mortgage is useful for self-employed borrowers and those with a variable income since they are not penalised for additional capital repayments or if payments are not made monthly. Under the product, repayments are set on pre-agreed cycles to suit the income inflows of the potential homeowner.

Cyclical mortgage

With its all-in-one design, this product can save aspiring homeowners a significant amount of interest as well as speed their debt reduction.

Plus, since it frees up money on a monthly basis by helping clients to smooth out monthly cash flow and lower their debt costs significantly, it can help clients to increase their investment activities. This allows small to medium enterprises and farmers to simultaneously seek working capital. Entrepreneurs or workers on lucrative contracts would be interested in the fact that they can borrow on the value of their own equity acquired from mortgage repayments.

Flexible mortgages are particularly suited to today’s lifestyle where jobs for life are virtually unknown. They also suit those either in business or plan to change from a full time career to run personal businesses. In addition to providing groups of potential home-owners with an opportunity to access mortgage financing, Cyclical Mortgage is alive to the fact that home-owners require customised mortgage plans. To this end, aspiring home-owners have access to a three-faced mortgage plan comprising of an Ace, House and Start-Up plans for periods ranging from five, 12 and 20 years respectively.

Makao concept

Homeowners are also free to choose a variety of other offers at Housing Finance. Equally, the trend for people with varying cycles of incomes is to buy a piece of land and later seek financing while looking for the best bargains from architects, constructors, consultants, legal process owners and building materials.

The Makao concept, a one-stop solution engineered by Housing Finance, provides the prospective house-owner with requisite pre-approved house plans and a consortium of building professionals who will work together to deliver a preferred home. The approach can save upto 20 per cent on construction costs.

The risk profile of the mortgage industry is changing in response to the demand created through customer preference. Customers are demonstrating more than ever their increasing expectations of personal service and a mutually beneficial relationship with their financial institutions.

The writer is a specialist on property at Housing Finance.