“For Ghanaians and non- Ghanaians looking to buy property in Ghana, it’s advisable to secure a mortgage even before you begin your search. This ways you can avoid delay in the buying process once you find your dream home.” This is what you hear on the market when you are trying to buy a house; some might ask what a mortgage is and which one is suitable for me? Well, no need to panic. Mortgage is a legal document that pledges a property to a lender as security for payment of debt.
For decades, the only type of mortgage available was a fixed interest loan repaid over 30 year. It offers the stability of regular, and relatively low- , monthly payment. In the 1980’s came adjustable rate mortgage (ARM’s) loans with an even lower interest rate that adjust every year for the life of the mortgage . At the apex of recent housing boom, when lenders were trying to squeeze even unqualified borrowers into mortgage, they began to offer creative or more suitable ARM’s with shorter rest periods, mind blowing rates and no limits on rate increases. Some of the Mortgage offers available on the market right now include.
Home Purchase Mortgage (HPM)
This type of mortgage is designed to assist companies and individuals in buying a property for their own use or for rental. The borrower is usually expected to make a minimum 15% down payment and the bank will provide a loan equivalent to a maximum 85% of the purchase price. The loan terms are usually 15 years and as with all home loans in Ghana, the interest rates are variable (ARM) rates.
Home Equity Mortgage (HEM)
This product is designed for people who already own property to release equity in that property in order to improve their liquidity. Only people or companies that already have properties which are fully paid for or are currently financed may apply for this mortgage. The maximum loan allowed under this programme varies from bank to bank, but the interest rate is always variable and the duration is generally 15 years. For banks such as HFC, Loans shall not exceed a maximum of 80% of the forced sale value (FSV) of the property. The maximum term for this facility is 15 years for both cedi and foreign currency loans. There must be clear and undisputed title to the property. The title must be duly registered.
Home Completion Mortgage (HCM)
Borrowers needing a loan to complete the construction of their home should apply for this product. The house could have been initially funded by the owners own money, their employer, bank or another mortgage company. Again, the maximum loan varies from bank to bank but the loan term is 15 years, the maximum loan-to-value is usually 50%, and the interest rate is variable.
Home Improvement Mortgage (HIM)
This loan is designed to help existing owners to improve their property or business premises. It is similar to the HEM above, except the loan must strictly be used on the designated property.
Construction Finance / Home Construction:
Construction Finance is currently offered in three (3) different ways (a) Construction finance to the real-estate developer (b) Construction finance to the borrower and (c) Construction finance to the customer of the real estate developer. In all cases this facility will be for the construction of homes. The target market for this product is mainly real estate developers.
Housing is very important to the social and economic fabric of the nation, hence the need to have insight into the industry that produces and manages the development of housing in the economy. Before you worry too much or get yourself in deep irreversible depth, find out what type of mortgage suits you and which payment plans is more convenient for you.