Whether you’re an experienced or first-time home buyer, making mistakes can be costly—not just financially, but also in terms of time, effort, and peace of mind. Worse, you might end up with a house that’s entirely wrong for your family. However, with the right information at your fingertips, you can navigate this process successfully from the start and make a smart purchasing decision.
How To Buy a House in Kenya
1. Determining What You Can Afford
First, understand your monthly expenses to determine how much you can set aside for a down payment. Remember, apart from the down payment, budget for the following:
- Title Search: Verify ownership of the house via the eCitizen platform at a fee of Kshs 500.
- Stamp Duty: A tax paid to the Ministry of Lands, ranging from 2% to 4% of the property’s value, payable through the Kenya Revenue Authority.
- Legal Fees: Typically 1% to 2% of the house price, with a minimum fee of Kshs 35,000.
- Mortgage Fees: Interest rates are between 12% and 14%, with a loan processing fee of 1% and valuation fees of approximately 0.5%.
- Home Insurance: Starts at Kshs 5,000 per annum, depending on the provider and package.
- Additional Costs: Include home inspection, maintenance, repairs, moving costs, and utilities.
2. Buying Using Cash or Mortgage
If you have enough money for a one-time payment, consider buying in cash to:
- Bargain for a better price and get a discount.
- Save on interest in the long run.
- Sell the house faster if needed.
However, buying in cash means tying up a significant amount of money, leaving little for other investments or emergencies. The alternative is a mortgage, with two types of plans:
- Fixed-Rate Mortgage: Interest remains the same until the loan is paid off.
- Adjustable-Rate Mortgage (ARM): Interest may vary based on market conditions.
Before choosing an ARM, know your potential monthly payments, the interest rate cap, and how rates might rise.
Advantages of Mortgages:
- Maintain financial liquidity for other investments.
- Only need a downpayment of about 20%, leaving funds for other expenses like repairs.
- Interest rates are about 14%, with flexible repayment periods.
Disadvantages of Mortgages:
- Long-term debt due to accrued interest.
- Risk of losing the house if repayments are not maintained.
- ARM interest rates may increase, raising payments.
- Additional charges like valuation and processing fees.
If buying with a partner or friends, ensure commitment due to the financial obligations involved.
3. Finding Your Perfect Design Style
Choose a design that fits your long-term needs. Consider:
- Space for children to play.
- Preferences for hosting guests inside or in an open space.
- Whether your current furniture fits the new house’s floor plan.
Answering these questions helps find a house that suits your budget and lifestyle.
4. Searching For Your Next House
Physical house-hunting can be time-consuming. Consider hiring an agent or searching online.
Using an Estate Agent:
- Agents have market knowledge and negotiation skills.
- They can access houses before they are advertised due to extensive networks.
- Agents charge a fee of about 3-6% of the purchase price, usually split between buyer and seller.
Searching Online:
- Conveniently filter properties by price, size, and location.
- House prices vary by location; for instance, a three-bedroom townhouse in Kitengela costs around Kshs 11M, while the same in Kilimani is Kshs 30M.
5. Finding the Right Conveyancer
Hire a licensed conveyancer to:
- Research the property and perform background checks.
- Represent your interests with the real estate agent.
- Draw up and review the contract of sale.
- Provide legal advice and handle payments.
A legal expert ensures compliance with property law, preventing unnecessary lawsuits.
6. Arranging a Home Inspection
Before making an offer, hire a professional inspector to assess:
- Construction quality: floors, ceilings, walls, drainage systems.
- Interior plumbing and electrical systems.
- Insulation and ventilation.
- Overall home safety.
An inspection report helps you decide whether to negotiate the price, request repairs, or find another property.
7. Making Your Offer
If using an agent, they will negotiate the price with the seller’s agent. With a mortgage, get pre-approval from the lender before making an offer. The offer letter, a legally binding document, includes:
- The amount you are willing to pay.
- The down payment (around 20% of the property value).
- Pre-approval information.
- Offer expiration date.
- Closing costs.
- Conditions for the seller.
According to Pramukh Developers Limited, start 5% lower than the asking price for negotiation flexibility. Once the seller accepts, sign the contracts and transfer the title.
