|#203 MWAVC| —On Mortgages in Ghana 🏠
I had two conversations this week around the getting mortgages in Ghana. One friend was encouraging me to look into it, and I indicated this system generally doesn’t work for me because it’s too damn expensive. Luckily enough, I found this on my timeline last night written by @parlenzy77. Simple enough explanation of what mortgages are and how they work. If you know the current economic situation in Ghana, I don’t think you’d go for a mortgage, especially over 15 years (which is the recommended period of time for such instruments).
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A mortgage in simple terms is the arrangement where a bank/lending institution lends you funds at an agreed interest rate to buy or build a property(land, building). The property is used as collateral until you have fully paid up. If you default, the bank/lending institution can repossess the property, and sell it to defray the outstanding loan balance.
The interest rates charged by the banks on the mortgage amount lent usually varies and per my research is lower for Government workers [ranges between 11-13% p.a] Commercial rates are between 22-28%p.a. Some banks as part of their staff incentives offer mortgages b/n 5-6%.p.a The interest rates charged by the banks on the mortgage amount lent usually varies and per my research is lower for Government workers [ranges between 11-13% p.a] Commercial rates are between 22-28%p.a. Some banks as part of their staff incentives offer mortgages b/n 5-6%.p.a The duration for most mortgages is 5-15yrs; with a maximum of 20yrs. However, the duration is affected by your number of years to your 60th birthday. For instance, if you’re 55yrs at the time of application, the maximum duration your mortgage repayment can travel is 5yrs. Some banks require a minimum deposit of 10-20% of the value of the mortgage you’re taking and the bank pays up the remaining 80% to the real estate firm while other types have zero deposit requirement. Some mortgages are pegged at either the US dollar or Ghana cedi. Repayments usually follow a fixed monthly installment. The repayment amount which is a factor of your duration and the value of the mortgage is usually not allowed to be more than 50% of your net income(Interest to Income-ITI). Most institutions prefer 40-45%. Your existing ITI from other loan repayments is included in your overall ITI.
THE GHANAIAN HOUSING AND MORTGAGE SITUATION (Using an ITI of 45%)
A government salaried worker earning GHS 2,500 monthly can get a mortgage loan up to GHS 93,700 at an interest rate of 12% p.a. The monthly deduction would be approximately GHS 1,125 over a 15 year period. On the other hand, an entrepreneur or a private person earning the same monthly income of GHS 2,500 can get a mortgage loan of GHS 59,000 using a commercial interest rate of 22% over the same 15 year period. His monthly deduction (GHS 1,125) would be same as a government worker. Meanwhile prices of houses in Ghana especially Accra are ridiculously expensive and often quoted in US Dollars. How would an average income earner afford this?
📱📱Quote of the day
“ Life is what happens when you're busy making other plans.” — John Lennon.
Remember: “Until the lion learns to write, every story will glorify the hunter.”