Home Ownership Made Easy In 3 Essential Steps – A Guide For Purchasing A House

Purchasing a house involves a few critical steps well summed up by Mr, Ismael Long.

GUIDES FOR PURCHASING A HOUSE – Home Ownership Made Easy In 3 Essential Steps

Simple Example of a Property:

Location: Hohola, NCD

Price: K300,000

Down Payment or Equity: 10%

Mortgage : 90% approved by Kina Bank

Debt-to-Income Ratio: 30% of a fortnightly salary of K1,000

Closing Costs: K6,000 (valuation report, insurance premium, legal fee, etc.)

Step 1: Equity

Equity is the portion of the property you own outright. When purchasing a house, your initial equity comes from the down payment. In this example, the house is priced at K300,000. With a 10% down payment, you need to pay:

Calculation:

Down Payment/Equity = K300,000 x 0.10 = K30,000

This K30,000 is your initial equity in the property. Ensure you have saved enough to cover this amount before proceeding.

Step 2: Mortgage Approval

The next step is securing a mortgage to cover the remaining 90% of the property’s price. In this case, Kina Bank has approved a mortgage for you. The mortgage amount would be:

Calculation:

Mortgage/ Home Loan = K300,000 x 0.90 = K270,000

Lenders assess your ability to repay the loan by looking at your debt-to-income ratio. Here we assume, Kina Bank has approved a mortgage based on a debt-to-income ratio of 30%. With a fortnightly salary of K1,000, your mortgage repayments should not exceed 30% of your income:

Calculation:

Fortnightly Mortgage Repayment = K1,000 x 0.30 = K300

This means you will need to make mortgage repayments of K300 every two weeks.

Step 3: Closing Costs

Closing costs are the fees and expenses you need to pay before finalizing the purchase of your home. These costs cover various services such as the valuation report, insurance premium, and legal fees. In this example, the total closing costs amount to K6,000.

Ensure you have this amount ready to avoid any delays in the purchasing process.

Summary – Purchasing a House

Purchasing a house involves a few critical steps to ensure a smooth transaction. Here’s a recap of the process using our example:

1. Equity: Save K30,000 for the down payment.

2. Mortgage Approval: Secure a K270,000 mortgage from Kina Bank with fortnightly repayments of K300.

3. Closing Costs: Prepare K6,000 to cover the valuation report, insurance premium, legal fees, and other closing costs.

By following these steps, you can successfully purchase your dream home in Hohola for K300,000.

The information provided is for general purposes only. Individual financial situations and details vary, so it is recommended to visit the home loan division of your preferred bank for a thorough assessment to determine your eligibility. The example used is ‘simple’ without details of the mortgagor.

Banks’ mortgage terms and conditions may vary but the principle is relatively the same.

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