apartment financing - mortgage options

January 26, 2024

Purchasing an apartment in Ghana can be an exciting yet daunting process, especially when it comes to financing. With the right mortgage, buying your dream home is within reach. This comprehensive guide explores the various mortgage options available for prospective homebuyers in Ghana looking to finance an apartment purchase.

Overview of Mortgage Options in Ghana

Several mortgage schemes exist in Ghana to help buyers finance home purchases. The main ones include:

Traditional Mortgages from Banks

  • Offered by major banks like GCB Bank, Fidelity Bank, and more
  • Require a down payment of at least 20% of the property value
  • Interest rates range from 25-35%
  • Mortgage terms up to 20 years

Mortgages from Ghana Home Loans

  • A government mortgage scheme
  • Caters to middle and low-income buyers
  • Down payment of 5-20% required
  • Interest rate around 25%
  • Mortgage term up to 25 years

Home Purchase Plan from HFC Bank

  • Caters to middle-income buyers
  • 10-20% down payment
  • Interest rates start around 27%
  • Up to 20-year mortgage term

Factors That Determine Mortgage Eligibility in Ghana

When applying for a mortgage in Ghana, lenders consider several factors:

Income Level

Your income determines the maximum mortgage amount you qualify for. Lenders ensure your debt-to-income ratio is within acceptable limits. Gross monthly income should be at least 10 times the proposed monthly repayment.

Credit Score

Lenders check your credit score and report to assess your creditworthiness. A minimum score of 300 is required for mortgage approval. Paying bills on time helps improve your score.

Down Payment Amount

A higher down payment percentage increases your chances of mortgage approval. Government schemes need 5-20% down, banks need minimum 20%.

Property Value

The property’s value compared to the loan amount requested is evaluated. The loan-to-value ratio should not exceed 90% for most mortgages.

Detailed Overview of Main Mortgage Options

Let’s explore the most popular mortgage schemes for financing an apartment purchase in Ghana:

Traditional Mortgages from Major Banks

The traditional mortgage route offered by major banks like GCB Bank, Fidelity Bank, and Zenith Bank is a popular option for buyers in Ghana.

Pros

  • Competitive interest rates of 25-35%
  • High loan amounts up to $3 million
  • Long repayment periods up to 20 years

Cons

  • Require substantial down payment of 20% or higher
  • Strict eligibility and paperwork requirements

Major banks offer up to 90% LTV ratio on their mortgage products. While interest rates are at the higher end, their terms and maximum loan amounts make them ideal for high-end properties.

Mortgages from Ghana Home Loans

Ghana Home Loans is a government mortgage scheme under the Ministry of Finance aimed at helping middle and low-income buyers.

Pros

  • Only 5-20% down payment required
  • Low interest rate around 25% fixed
  • Generous mortgage term up to 25 years

Cons

  • Lower maximum loan amount of ~$100,000
  • Strict eligibility criteria

With higher LTV ratios and lower down payment requirements, Ghana Home Loans targets budget-conscious homebuyers. Its flexibility and interest rate make it popular.

Home Purchase Plan from Republic Bank

Republic Bank’s Home Purchase Plan caters to middle-income homebuyers in Ghana.

Pros

  • Competitive interest rates starting ~27%
  • Up to 20-year mortgage term
  • No early repayment penalties

Cons

  • 10-20% down payment required
  • Lower max loan amount than banks

While not the cheapest mortgage, Republic Bank offers borrower-friendly terms. No early repayment penalties provide flexibility.

Hidden Costs to Factor into Apartment Purchase

When budgeting for your apartment purchase, consider these additional hidden costs:

  • Legal fees – 1-2% of property value
  • Valuation fees – around $300
  • Mortgage registration tax – 0.5% of loan value
  • Home insurance – Expect annual premiums of ~$500
  • Renovation costs – $5,000-15,000 on average
  • Agency fees if using an agent – Up to 2% of home value
  • Ongoing maintenance and utilities

Factor in an extra 10-15% over the purchase price to account for these expenses.

Tips for Getting Mortgage Pre-Approval

Getting pre-approved for a mortgage early in the home buying process is advisable. Here are some tips:

  • Assess your finances and credit score first
  • Prepare all required documentation for income, assets, identity
  • Shop and compare rates from multiple lenders
  • Lock in a favourable rate with a pre-approval letter
  • Only search within your pre-approved amount
  • Work to improve your credit score and down payment savings

Pre-approval gives you bargaining power and demonstrates serious buying intent to sellers.

Steps for Applying for Mortgage Options in Ghana

Follow this step-by-step process when applying for a mortgage with any lender:

  1. Determine financing needs – Consider purchase price, down payment funds, and required loan amount.
  2. Check eligibility criteria – Ensure you meet the lender’s requirements around income, employment, credit score, etc.
  3. Submit loan application – Provide documents verifying identity, residence, income, and assets.
  4. Property valuation – The lender will assess the property to determine its value and loan amount.
  5. Loan approval – If approved, you will receive a letter outlining the mortgage terms like rate, fees, amount, and repayment schedule.
  6. Legal procedures – Engage a lawyer to handle title searches, sales agreements, and paperwork.
  7. Mortgage registration – Register the mortgage at the appropriate government agency by paying the registration tax.
  8. Close on property – Finally, sign the apartment purchase agreement, transfer funds, and get the keys!

Alternatives If Mortgage Application is Declined

If your mortgage application gets declined, here are some alternative financing options:

  • Reapply after improving credit score – Build your score and wait 6-12 months before reapplying.
  • Consider rent-to-own agreements – Make instalments towards the property while renting before finally buying.
  • Investigate personal lending – Borrow from family or private lenders though interest rates are usually high.
  • Explore company home purchase schemes – Some employers offer housing loans as employee benefits.
  • Save up a larger down payment – Come back with 20-30% down to improve your borrowing capacity.
  • Opt for a less expensive property – Reduce the purchase price to qualify for a smaller, more affordable mortgage.

FAQs on Mortgage Financing for Apartment Purchases

Here are answers to some frequently asked questions about financing apartment purchases with mortgages in Ghana:

What is the typical mortgage rate in Ghana?

Mortgage rates from banks start around 25-35% while government schemes offer lower rates of 25% or under. The average rate for a mortgage in Ghana is 26-28%.

What documents do I need for a mortgage application?

Required documents include passport, GhIPPS details, pay slips, bank statements, tax clearance certificate, property title certificate, and property valuation report.

How long does mortgage approval take?

Most lenders approve and disburse mortgages within 30-60 days. The property valuation process often takes the most time. Government schemes may take longer.

Is a higher down payment better for mortgage approval?

Yes, lenders favour higher down payments as it reduces their risk. Aim for 20-30% down payment if possible versus the minimum 5-10% required.

Are there penalties for early mortgage repayment?

Most standard mortgages from banks do not impose early repayment penalties. But confirm this in your loan agreement terms.

Conclusion

Purchasing an apartment is an attainable dream with the right mortgage financing. Ghana offers several options including traditional bank mortgages, government schemes, and affordable housing plans to suit different budgets and needs. By understanding the eligibility criteria, hidden costs, and application process, prospective homebuyers can secure pre-approval and embark on finding the perfect apartment in Ghana. Landmark Homes, an exclusive luxury apartment developer in Accra, stands ready to help you finance and find your dream home. Contact their team today to invest in a prestigious apartment tailored to your lifestyle.

Posted in: Apartments

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