Mortgage 101

What is a mortgage?

A mortgage is a loan a person takes out from an institution to finance a house, buy a land or purchase property. Mortgages usually come in three parts:

Monthly payments : The monthly payments paid over a period of time, which usually includes payment on the principal of the loan as well as interest.

Fees: The various costs one may have to pay up front to get access to the loan one is applying for.

Down payment : The amount one pays up-front in order to secure a mortgage.

Where can one apply for mortgages in Ghana?

Typically in Ghana, one can apply for mortgages from banking institutions such as:

 Absa: Absa promises an easy and faster way to get access to mortgages with 90% financing for home purchase and up to 70% for equity release and home improvement.

Republic Bank : Republic bank offers loan options from low income to high income receivers so that one can buy, build and own their own home.

Cal  bank : Calbank offers mortgage loans that help individuals purchase a home of their choice with convenience and good interest rates.

First National Bank (FNB) : FNB offers diverse home and land-owning options to both new home/landowners and existing home/landowners.

Interest rates

According to Statista, the prevailing mortgage rate in Ghana in 2020 stood at 23%. However, these rates differ from bank to bank.

The cedi conventional mortgage was also pegged at 24% in October 2020.

Types of mortgages

– Home Equity Mortgage

This mortgage type allows homeowners to borrow against the equity of their property to help with cash flow. This is only applicable to people who have made full payment on a property.

– Home Purchase Mortgage

This mortgage type helps both individuals who want to buy a property for residential purposes i.e. rent or purchase. A minimum of 15% is expected from the one requesting for the loan and paid within the span of 15-20 years.

– Home Completion Mortgage

For individuals who want to complete a property they own but are strained by financing challenges. The property could have been funded initially with the owner’s money, bank, a mortgage company or employer.

– Home Improvement Mortgage

This loan type helps individuals who are looking to refurbish or renovate their homes.

How does one qualify for a mortgage?

Depending on the institution and loan option, you will be required to submit:

• A completed application form

• Proof of identity in form of a passport, license, voter’s ID, etc.

• Proof of income

• Offer letter from the property owner.

• Proof of address

• Building permit

• Credit History

• Property documents

To qualify, one must show proof of repayment, have a good credit history and must be within legal age.

Which mortgage is right for you?

Available in Ghana are different options to choose from mainly depending on one’s financial capacity as a buyer. These options are available to Ghanaians in and out of the country.

Home Purchase : This is for individuals who already own a property or two but want to acquire another property.

100% Purchase : This is for individuals who do not have substantial money to be eligible for a mortgage, so the bank makes a 100% deposit on their behalf. With this option, one would be required by the bank to take an insurance policy on the property.

Buy to Let: This is for individuals who have properties they live in but want to purchase another one for the purpose of renting.

Can non-Ghanaians apply for a mortgage in Ghana?

To qualify for a mortgage in Ghana as a Non-Ghanaian, one may either have to have relational ties (relative, husband/wife, child) or to have been working in Ghana for at least 5 years.