What is a Mortgage & How to get it in Kenya

Mortgage loans in Kenya, how they work, the different types of these loans and a dive into the pros and cons of such.

Carson O.
9 Min Read

Are you looking forward to purchasing a home or commercial building using a mortgage? This article will take you through mortgages in Kenya, how they work, the different types of these loans and a dive into the pros and cons of such.

Keep focus…

What is a Mortgage?

A mortgage is a loan by a bank or any other financial institution that a person can use to finance the purchase of a home.

Mortgages are different from other loans such as personal loans, and student loans.

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How so?

You see when a bank gives you a mortgage, they will use your house as collateral, meaning that if y any chance you don’t pay the housing loan on time, they can take possession of your home.

How exactly does a mortgage work in Kenya?

When you want to buy a home for your family or yourself, you may realize that you don’t have enough funds to purchase the house you are interested in.

In such a case, a mortgage is what you need. To access this, you must provide a bank with a down payment that is usually around 20% of the total cost of the house. This amount, however, varies from bank to bank.

The bank will then process your mortgage loan and approve your application under certain conditions listed below:

  • You will need a good credit score and report. That means that you should have cleared most, if not all of your past loans. Read more about credit scores here.
  • A fixed-rate interest will need to be set over a term, i.e., the number of years you will take to pay the loan.
  • Some loanees may opt for a variable/floating rate which is an interest rate that can change over time. Unlike a fixed rate, which remains constant throughout the loan or investment, a floating rate is tied to a benchmark or reference rate.
  • The setting of an amortization period – This is the length of time you will need to fully pay for the loan.

Let’s get deeper;

When you take a loan and give a down payment of 20%, the bank offering the mortgage loan will pay 80% and therefore, you will have 20% equity and 80% debt.

So, if in the first year, you pay a 5% interest fee, your equity increases as your debt decreases. As a result, a portion of your monthly payment contributes to reducing your debt, while the remaining portion covers the interest expense. Over time, as you continue making payments, your liquidity will gradually increase as your debt decreases, allowing you to build equity in the property.

Further, real estate appreciates over time.

In such scenarios, all the profits accrued are yours. The bank does not share in your returns. This will be beneficial if you choose to sell the house for whatever reasons you may have.

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Types of Mortgages in Kenya

When it comes to mortgages, there is no one-size fits all option. Here are a few main types of mortgages you may encounter;

#1. Conventional Mortgage

This is a loan that is not backed by a government agency. Such include:

  • Fixed-rate mortgages have an interest rate that remains the same for the entire term of the loan, usually 15 or 30 years. This makes it easy to budget for your monthly payments, as they will not change.
  • Variable/Adjustable-rate mortgages have an interest rate that can change over time, based on market conditions. This means that your monthly payments could go up or down. ARMs typically have a fixed-rate period of 3, 5, 7, or 10 years, after which the interest rate can adjust annually.

#2. Loans with lower down-payments

This type of mortgage makes homeownership accessible to more people, who wouldn’t have afforded the conventional mortgage down-payment requirement. Such include:

  • National Housing Corporation (NHC) loans require a down payment of as low as 10%.
  • Homebuyer assistance programs may offer down payment assistance to qualified borrowers.
    • Kenya Mortgage Refinance CorporationCooperative Bank of Kenya
    • Equity Bank

To qualify for such loans, you must fit the criteria as elaborated below:

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  1. You must be a Kenyan citizen or permanent resident.
  2. You must have a good credit score.
  3. You must have a steady income.
  4. You must be able to afford the monthly mortgage payments.

#3. Commercial Mortgage

Unlike residential mortgages mentioned above, which are used to finance personal homes, commercial mortgages are intended for investment or business purposes. They are typically obtained by individuals or businesses seeking to purchase, refinance, or develop commercial real estate properties.

How can you compare different mortgages?

Different financial institutions offer different mortgage types with different interests and repayment periods. For this reason, you will need an online mortgage calculator that can help you compare estimated monthly payments, based on the type of mortgage, the interest rate, and how large a down payment you plan to make.

Mortgage Calculator

Mortgage Calculator

Advantages of taking a Mortgage loan

  1. Homeownership: A mortgage allows you to purchase a home without having to pay the entire purchase price upfront, enabling you to become a homeowner.
  2. Leveraged Investment: By using a mortgage, you can leverage your investment in real estate, potentially benefiting from property appreciation over time.
  3. Predictable Payments: With a fixed-rate mortgage, you can have stable and predictable monthly payments, making it easier to budget and plan your finances.
  4. Tax Benefits: In some countries, mortgage interest and property tax payments may be tax-deductible, potentially reducing your taxable income.
  5. Building Equity: As you make mortgage payments, you gradually build equity in your home, which can be a valuable asset and a source of wealth accumulation.

Cons of a Mortgage

  1. Debt and Interest Payments: Taking on a mortgage in Kenya means having a significant amount of debt and paying interest over the life of the loan, which can increase the total cost of homeownership.
  2. Financial Commitment: A mortgage is a long-term financial commitment, often lasting 15 to 30 years, requiring you to make regular payments over an extended period.
  3. Risk of Foreclosure: If you fail to make mortgage payments as agreed, there is a risk of foreclosure, potentially leading to the loss of your home.
  4. Limited Flexibility: Having a mortgage can restrict your financial flexibility, as a significant portion of your income may go towards mortgage payments, leaving less room for other expenses or investments.
  5. Market Volatility: Real estate values can fluctuate, and there is a risk that the value of your property may decrease, impacting your overall net worth.

10 institutions that offer mortgage loans in Kenya

  1. Kenya Commercial Bank (KCB)
  2. Cooperative Bank of Kenya
  3. Housing Finance Company of Kenya (HF Group)
  4. Standard Chartered Bank Kenya
  5. Barclays Bank of Kenya (Absa)
  6. Equity Bank Kenya
  7. National Bank of Kenya
  8. Stanbic Bank Kenya
  9. Diamond Trust Bank Kenya
  10. I&M Bank Kenya

For more information, read here


Mortgages can offer valuable solutions to those who are looking forward to purchasing a house or building one. As you apply for a mortgage in Kenya, make sure you do your due diligence and ascertain that the loan is beneficial to you. Further, make sure you can pay the interest fees consistently lest you risk losing your house and down payment altogether.

Good Luck!

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I am a multi-faceted professional with a strong foundation in Business and Finance, honed since 2020. Additionally, I possess a deep passion for automobiles, serving as an avid car enthusiast. In parallel to my diverse interests, I am also a dedicated student pursuing a career in the medical field.
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