Prime
Beginner’s guide to getting a mortgage
The lender will use your bank statements to check whether your income matches what is on your payslips and examine your recent spending.
What you need to know:
In Uganda, getting a loan might seem like such a hard task but there are ways to improve your odds. With research, it will be easy to find a financial company that will give you the best rates.
Josephine and Alphonse Nyanda, a fairly affluent couple, took up a mortgage unexpectedly. The couple and their two children woke up one morning to a notice from their landlord that their home for the past seven years was on sale. But the landlord promised to give them prioritised consideration if they wanted to buy the house themselves.
“At first, I laughed at the idea because I knew we could not come up with the Shs250m the house was going for. But we loved the house, it is the only home our children knew and more than anything, we wanted to give them that continuity,” Nyanda narrates.
The couple took it upon themselves to come up with the money until a chance conversation led them to a bank where they obtained a mortgage they used to buy the house.
Michael Mwesigwa, the head of marketing at dfcu bank, is rather wary of calling it a mortgage; he prefers the term home loan. “When you call it a ‘mortgage’ it has connotations of ‘debt’ which is not accurate,” he says. He describes a mortgage as a loan from a bank or any financial institution against the property you buy.
What you will need
Molly Akite, a relationship officer at Housing Finance bank, clarifies that the first step to accessing a home loan is to have 30 per cent of the required amount for the purchase.
“You will also need to have a copy of a valid land title, approved building plans, bills of quantities of the outstanding work, photographs of at least four elevations of the building, copy of a sale agreement and an Environmental impact Assessment report from National Environmental Authority ( NEMA) for projects of Shs1b and above,” says Atike.
Other requirements include proof of borrower’s income such as a letter from the employer.
If self-employed, a Bank statement for the last 12 months will suffice. You will also be required to pay some money related to the acquisition of your mortgage.
Fees payable will cover application fees, title search and credit inquiry, boundary opening and valuation, stamp duty and transfer fees, as well as arrangement, insurance and legal fees.
Mwesigwa breaks down the types of loans offered;
Outright purchase
This is applies to all individual customers borrowing for the purpose of acquiring a house. The loan has an (LTV) Loan to Values Up to 125 per cent of FSV. LTV refers to the amount of the property’s value that you can borrow.
Buy to let
This option is specifically tailor made for any individual who is interested in the purchase of residential units/apartments to earn rental income.
Construction loan
This option is geared towards enabling an individual owning land to be able to build their desired home/residential property.
Home improvement loan
This option allows individuals who have started construction but need extra funds to finish construction of their residential house. Additionally this option allows individuals to renovate their residential properties.
Equity release
This type of loan applies to a customer who owns a complete titled residential property and would like to get cash release from their property to invest in other legal activities qualifies.
Refinance
The loan is ideal for any customer who wishes to transfer their existing home loan and may in addition require additional funding for the above product offerings.
Legible to get mortgage
Like most loans, the borrower must prove that they have capacity to actually pay it off successfully. “So, clients vary from salaried employees, landlords, self-employed individuals and Ugandans living in the diaspora as long as they have verifiable and regular income,” explains Mwesigwa.
Akite further explains that for salaried employees, one has to earn a minimum of Shs1m every month. To verify income, the salaried employee must provide six-months bank statements from other financial institutions, loan statement (in case you have loans from other financial institutions), three months latest pay slips, letter from employer and tenancy agreements.
A self-employed borrower must provide at least two most recent trading licenses, certificate of registration, memorandum and articles of association, resolution to borrow (Bank format), audited financial books for the last two years, tenancy agreements, rental receipts and proof of ownership for rental income.
How much can I get?
Amount
The minimum amount one can get from Housing Finance bank is Shs10m while dfcu’s minimum is Shs30m for a salaried employee who earns up to Shs2m.
Repayment
Home loans usually come with either a fixed or a variable rate attached. A fixed rate remains constant for the length of the deal while for a variable rate mortgage, what you pay varies. So, if interest rates rise, then your mortgage payments are likely to go up as well.
Loan terms
Most mortgages have a five-25 year term, but when you apply you can choose whether you want to repay what you owe over a shorter or longer term.
Organise documents
When applying for mortgages, home buyers must document their income.
Qualify yourself
You should already know how much you can afford to spend before the bank tells you how much you qualify for.
Do your research
Talk to as many banks as possible to compare rates. Check with friends, co-workers and neighbors to find out which banks they enjoyed working with.
Other bank rates
• Centenary bank’s Cente mortgage ranges from Shs20m to Shs100m with a repayment period of 10 years and a grace period of six months.
• Stanbic Bank offers financing of up to Shs2.5b payable in up to twenty years with up to three times monthly repayment.
