Types of Mortgages in Kenya 2020

In this article, we will discuss the various types of Mortgages in Kenya.

In this article, we will look at:

  • Definition of a mortgage
  • The main types of mortgages in Kenya
  • Where to get a mortgage loan in Kenya

What is a Mortgage in Kenya

A mortgage is a legal agreement between a bank or a financial institution that lends money at the interest rate in order to facilitate acquiring of a house.

The home that one acquires becomes the security for the loan extended. Therefore if one defaults in payment, the bank can sell the house to get its loan amount bank.

The main types of mortgages in Kenya

In Kenya, Mortgages come in two main forms:

  1. Variable-rate mortgages

This type of Mortgage is one that has a varying interest rate with the initial rate is given is always lower. However, with time, the interest rate changes upwards. There is usually no certainty as to how high this interest rate can increase.

There are two main factors that affect the variable interest rate mortgage:

Margin – These are numbers that can change. The good news is that this rate is highly negotiable. As it is dependent on the factors that a borrower can adjust. These include creditworthiness, amount of salary earned and down payment.

Index – The index rate is the standard market interest rate dictated by the current economic conditions. Whether this rate goes up or down, it is highly dependent on the Margin rate above.

There are both advantages and disadvantages of taking up a variable rate of interest mortgage.

Related: How to Build Low-Cost House In Kenya

The advantages include:

  • Low monthly interest rates – as the initial monthly payments.
  • Lower interest rate – the interest rate is always lower as compared to that offered to the fixed interest rates. Moreover, this interest is based on a 10-year treasury bill.


  • One will have limited avenue to refinancing opportunities
  • It is quite risky as the interest rate may increase at any time.
Apartment - Mortgage
Apartment – can be acquired using a Mortgage

2. Fixed-rate Mortgages

This mortgage plan is based on a fixed interest rate and loan duration which may be between 15 – 20 years. With this type of loan, you will be paying the same amount of loan for the period agreed.

Moreover, it is worth noting that there are various factors that influence how your fixed interest rate will be determined. These factors include:

The current prevailing interest rate – What’s the CBK rate for the prevailing interest rate.

Insurance rate – is the bank or institution offering you the loan paying for your insurance?

Financial status – income rate, creditworthiness

Pros of taking a fixed interest rate

  • Sometimes the rates may be lower as compared to getting a variable mortgage type.
  • You are assured that the interest rate will remain the same
  • Monthly payments do not change as well

Cons of taking a fixed interest Mortgage type

  • The size of the loan you can access is often low
  • Moreover, the interest rate may be very high
  • The monthly payments will be higher as compared to others

Where to get a mortgage loan in Kenya

There are various banks and other financial institutions in Kenya that one can secure a loan from Kenya.

Here is a list of the best places to get a loan from:

  1. Kenya Commercial Bank
  2. Housing Finance Group
  3. Consolidated Bank
  4. Citibank Kenya
  5. CFC Stanbic Bank Kenya
  6. Cooperative Bank
  7. NIC Bank
  8. Commercial Bank of Kenya

How to Acquire a Mortgage Loan in Kenya

There are various steps to follow in order to acquire a Mortgage Loan in Kenya:

  • Application – select a place you would like to secure your loan from
  • Approval – After application, you will wait for your loan to be approved
  • Processing – Once approved, your information will need to be processed like Stamp duty
  • Getting an offer – The lender gives you an offer
  • Collateral – which may be your documents for the house
  • Payment  – pay your down payment and you are good to go.
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Mary is one of the leading writers on Urban Kenyans. She is knowledgable on matters Kenya and has been able to educate many Kenyans on this platform.

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