The French translation of the word “mortgage” means “bound until death”. In fact, the root word “mort” means “death”. Thus, we derive the same sense of finality in similar words such as “mortuary”, “morgue” and “morbid”.

Interesting, isn’t it?

Well, there’s more to this topic than meets the eye and we have seen that a mortgage can be like a knife. You can use it to destroy or use it to prepare a delicious meal.

How do you plan to buy your home, without stressing your family?

Is it even possible?

If you are planning to borrow to buy a home, these are 5 things to do before you fill in your bank application for that mortgage.

Enjoy reading + put it into practice.

——————–

□    Step 1. Organise

The pain of application is in the amount of paperwork you have to submit, in order to be appraised as either creditworthy or not. Download the requirements from your bank’s website and ensure all requirements are ticked.

Below is an example of documentation needed from one of the local banks –

• Completed and signed application form
• Certified copies of last 3 pay slips
• Certified letter from employer stating terms of employment
• Certified copy of ID / passport
• Copy of PIN certificate
• Sale agreement
• Documentary evidence of any other income
• Certified copies of bank statements for 12 months (for non-Standard Chartered customers)
• 3 colour passport-sized photos (for non-Standard Chartered customers)
• Copy of title deed 

——————–

□    Step 2. Credit check

There’s a new sheriff in town!

If you are one of those Kenyans who occasionally re-prioritise who you are going to pay first (we feel you :)) then you will want to register with one of the registered Credit Reference Bureau and obtain your FREE report BEFORE you apply for a loan or mortgage.

A bit of history. The Banking (Credit Reference Bureau) Regulations 2008 gave life to the Credit Reference Bureau that provides lenders with a confirmation of whether you have defaulted elsewhere. The 2008 legislation was part of the larger Banking Act (Cap 488). This was quickly followed by the Credit Reference Bureau Act (2013) which incorporate CRB matters in the Banking Act as well as the Microfinance Act (2006).

The Banking (Credit Reference Bureau) Regulations 2020 is the latest version.

Download it here >>

 Eventually, the use of credit checks will expand beyond lenders, to suppliers, landlords, education institutions – basically, anyone who wants to start a money relationship with you. This is best international practice – and it is coming to Kenya. Be aware. 

+

CREDIT REFERENCE REPORT STRUCTURE

What data will you find in your FREE Credit Report (Yes! Your first one is free, so get it :))

The Data Standards Manual supports the Data Specifications Document developed in accordance with Regulation 14(4) of the Banking (Credit Reference Bureau).

Download it here >>

If you feel aggrieved, note that CIS Kenya runs an independent Alternative Dispute Resolution Center. And aggrieved borrowers can access this Tatua Centre FREE OF CHARGE.

 

Please see some details that you will find in a typical Credit Report for an Individual –

1. Name as appears on ID document
2. Citizenship details
3. ID numbers
4. PIN number (alternate)
5. Postal Address
6. Telephone contacts
7. Marital status
8. Emails if available

• Credit history as reported
• Court judgements as reported
• Referees

 

Please see the details that you will find in a typical Credit Report for a Company–

1. Name as appears at the companies registrar (BRS-Business Registration Service), and trade names if different
2. Company registration numbers and details
3. Postal Address
4. Physical Address
5. Telephone contacts
6. Emails or websites if available

• Credit history as reported
• Court judgements as reported
• Guarantees
• Shareholdings and or directorships

Bottom-line: It goes without saying that your Lender will seek this report, so you might as well know what they are going to say, right? 

——————–

□    Step 3. Bank statements

Where have you been receiving your salary?  What does that account look like?

Hardcore/Flat – Some accounts do not show any fluctuation whatsoever or might feature just a couple of transactions.

Bank interpretation – This is not your main account. You’re hiding something. They will probably ask you for other bank account statements.  Fortunately, M-Pesa statements are factored in as Kenyans have taken their transactional history to Safaricom – Ouch!

Overdrawn/Arrears – Some accounts show just one incoming credit, followed by a long string of debits, ending with the account in an overdrawn position.

Bank interpretation – How can you overdraw your account monthly and then apply to borrow from us? You have great audacity! And not the kind that Obama talked about.

Bottom-line: There are lots more other aspects of your statements that they will analyse, but the above points are a good start. Have your explanations ready. 

——————– 

□    Step 4. Title documents

It is quite interesting that some banks in this town go the whole hog – from document collation to approval – before realising that they CANNOT lend because there is something wrong with the property.

It is either a road reserve, or was previously government land, or there is a court case hanging over the property. Or even, that the property is listed in the Ndung’u report that lists dodgy properties.

Appointed by President Kibaki in June 2003, the Ndung’u Commission was comprised of 20 Kenyans to tackle and quantify the level of corruption in matters land. This mix of ordinary citizens, lawyers and civil servants generated a list of illegal and irregularly allocated public land in Kenya. The report’s 244 pages are a good read and form a fundamental part of due diligence for Lenders, Valuers and Advocates.

+

After accepting you Lender’s Offer Letter – the bank will now commence on Due Diligence. It will instruct its Valuer to take a look at what you’re planning to buy and prepare a Valuation Report, in triplicate – which, yes, YOU pay for.

(So, please, insist on carrying away one of the valuation reports.  Not a copy.  The original.  You have already paid for it, so retain one.)

Back to the point. To avoid wasting time, do conduct your own official search at the Lands Office before you sign your Sale Agreement or on Ardhisasa if the title has already been converted.  Your advocate can help you with this. Check for caveats, encumbrances, legal suits that have been filed in court etc. so that there are fewer surprises as the transaction proceeds. 

——————– 

□    Step 5. Plan your mortgage for freedom

If you could buy your home in 5 years, how many would you buy?

This is the crux of answering how a mortgage can help you fire your boss.

Others have done it, why not you?

Many have said that people perish from lack of knowledge. We all know we should wash our hands before having a meal. When we don’t, we risk death via cholera and other diseases. Or a runny stomach that messes with the rest of our day. 

Likewise, what rules should you follow BEFORE even setting foot in front of a Lender to borrow for your home? What rules can you apply, if you are currently running a mortgage but want more room in your pocket to do other things?  How can you replace your active salaried income with steady passive income, using mortgage facilities?

This knowledge is not a secret. Take time out from your world this month and make room for more.

It is four hours of practical learning, so do come along with your LAPTOP + charger and we’ll show you what you probably have not been shown by your bank, that is, how to plan the mortgage for your benefit, rather than theirs.

Deal?  Get the details here >>

—

Resources –

List of licensed Credit Reference Bureaus (by Central Bank of Kenya) – download it here

Directory-of-Licenced-Credit-Reference-Bureaus.pdf >>