Mortgages in Ghana
The Real Estate sector has become one of the most fertile business fields in the country, Ghana and has seen huge investors both locals and foreigners investing good sums of money for reasonable returns.
The sector has over the past decades seen tremendous development with real estate development and houses spread throughout the country with much concentration within its capital, Accra.
During the early period, these real estate houses were only occupied or purchased by the high-income earners within the society whether or not they had access to a facility like a Mortgage, and the locations of these developments only meant that such high or prominent persons and families could afford such houses or homes.
Real Estate houses were very expensive and so more potential homeowners could not overlook this to consider the other benefits an already-built house had to offer. For the ordinary Ghanaian, the mention of purchasing a real estate house seemed far from him/her and was much like a dream he/she is never yet to get close to.
This, clearly highlights the challenges that faced both real estate developers and potential home buyers, whose purchasing power was low. Wrong perceptions and lack of vital information around such facilities like mortgage houses, flexible payment terms, different housing units/residences, building quality, etc. were areas that needed to be worked on especially by the real estate developers in shifting the paradigm and creating this ages’ possibility of homeowners coming from the category of lower middle-income earners.
Focusing on Mortgages in Ghana, for instance, it remains one grey area where very little knowledge about it is possessed by the ordinary Ghanaian. And even among the few that do, lack the courage and willingness to harness such facility.
In this article, we intend to explore all information on Mortgages In Ghana – presenting it as the financial tool designed and offered by a few financial houses in Ghana helping with the possibility for the ordinary Ghanaian to own a real estate home In Ghana.
What is a Mortgage?
A mortgage is a form of financial assistance accessed by a borrower through a financial house to secure or purchase a house. The house is usually agreed upon and used as collateral by both parties and in an unfortunate situation where the borrower defaults, the house is then taken over by the finance house which was the lender in this case, and sold to recoup its losses.
Mortgages consist of 4 main components; principal, taxes, insurance, and interest. Its payment period is usually monthly.
Prior to securing a mortgage, the borrower in most cases agrees to some form of terms and conditions. These terms and conditions specify and guide how long the borrower has to pay the mortgage back, which mostly spans decades, and how much he/she has to pay each year as well as what she’s required to pay as a down payment.
The Two Main Types of Mortgages In Ghana
Fixed-Rate Mortgage: With this kind of mortgage in Ghana mortgage banks provide borrowers with an already established interest rate over a set period usually from 10 – 30 years. This implies that for a fixed interest rate on the mortgage, the shorter the period, the higher the monthly installment payment, and vice versa. However, the longer it takes the borrower to repay the loan, the more the borrower pays the interest charges.
If there is one advantage of a fixed-rate mortgage then that is borrowers getting to count on their monthly mortgage payments is the same every month throughout the life of their mortgage.
Adjustable-rate mortgages (ARMs): These are mortgages that come with interest rates that usually change or fluctuate over time due to increases in market-rate but within the loan period.
This however changes the interest the borrower gets to pay. And as the name implies, they adjust the interest from time to time usually within a six months interval or a year.
Balloon mortgage: With this kind of mortgage in Ghana, the borrower’s monthly payments do not completely take care of the entire loan at the end of the period. As its name suggests, the payments start low but balloon to a much larger amount at the end of the term.
Clearly, this type of mortgage seems appropriate for people who expect to have a higher income at the end of the borrowing period than when they started, or even those who expect to sell the house before the loan period ends.
Second Mortgage: This type of mortgage also known as a home equity loan, exist and could be accessed by initial borrowers who may take out a second mortgage to secure a loan using the initial house’s equity as collateral.
Top Mortgage Banks In Ghana
Republic Bank, formally HFC bank has a solid reputation for providing mortgages to homeowners in the country. It has a 30% share of the total market mortgages in Ghana.
Its standard home loan rate is 24% p.a. and its APR is 28.6% as of 2019. However, one must expect additional transactional costs aside from those mentioned above. They include; a processing fee of 1.5% and a facility fee of 1%.
Soley for employees of government agencies, Republic Bank also offers a Public Servants’ Housing Loan Scheme from the Government of Ghana. This mortgage product has an interest rate of 11.9% and the loan duration is 20 years max.
Stanbic Bank, with no limit to the amount required to acquire a real estate house, Stanbic Bank remains one of Ghana’s bigger commercial banks that lends money to individuals who meet all requirements in their quest to buy a home. Their facility fee is 2% with a loan repayment between 5 to 20 years.
Absa, with a unique selling point around fast, convenient, and easy way of securing a loan for a house, Absa looks to help well-qualified individuals to own a home and in certain instances help you borrow against a home owned and to even assist you in giving your current home or house a facelift.
Absa offers up to 90% financing for home purchases and 70% financing for home improvement.
Cal Bank is one of Ghana’s mortgage providers that aim to help individuals between the ages of 21 to 55 years acquire a home of their choice after meeting all of their requirements such as an offer from a real estate developer – one that is done by Hyde Homes; Income verification; Credit history, etc.
Consider these and other banks for your first or second mortgage and speak to Hyde Homes as you hope to own a home.
Fidelity Bank Ghana, similar to the other banks, Fidelity has many mortgage products ranging from Home finance, home equity, home completion, and home improvement to serviced plot finance. These many products are simply meant to meet the different needs of homeowners. However, the diversity of its products is similar to those offered by other banks, making the cost of borrowing a major decision-making point. As of 2019, its APR on cedi mortgages was 30.5%.
Deposits Requirement and Time-Frame for Repayment
Apart from the additional cost a potential homeowner is required to forfeit, usually, 15% -25% would be required by the partnering bank as a down payment with the rest expected to be paid back in monthly installments over 15 years on average.
General Requirements to Secure a Mortgage In Ghana
Requirements to secure a Real Estate Mortgage in Ghana will obviously differ from one mortgage provider to the other. Cal Bank’s document demand may not be entirely the same as Absa’s or Stanbic’s. However, below are a few general requirements to expect;
- A completed and signed Mortgage application forms
- A form of identification I.e. passport, driver’s license, voter’s ID, etc.
- Verification of income and employment from your employer.
- Copies of individual tax returns and audited accounts for the last 3 years.
- Offer from a Real Estate developer
What is the Current Rate for a Mortgage House In Ghana?
In Ghana, finding the actual mortgage rate means visiting any of the Mortgage banks listed above – it is the best advice this article could offer. However, as of 2020, the average interest rate on mortgages in Ghana was 23%. The previous year, which is 2019, showed that data from the Bank of Ghana on the annual percentage rate (APR) on mortgages ranged from 18.7% to 31.7%. APR is a broader and more effective measure of the cost of borrowing than interest rates.
A look at the various mortgage providers’ websites will rather reveal the specific rates as charged by them.
Mortgage Rates in Ghana: GHC vs USD
In Ghana, mortgage loans in major foreign denominations like the USD and British Pound are possible to secure thanks to banks such as First National Bank, and Republic Banks just to mention a few.
Compared to the Ghanaian currency, these foreign currency denomination mortgages have a far lower interest rate.
Averagely, Ghana’s US denomination mortgages have interest rates of 11% – 12.5%.
Owning One of Hyde Homes with a Mortgage
With this information regarding Mortgages In Ghana, Hyde Homes present its East Airport development to you. It’s open and ready to discuss mortgage plans with you, and make available any kind of documents needed by the mortgage provider as you seek a home loan.
Hyde Homes is a boutique real estate firm driven by seasoned and experienced real estate professionals.
With its headquarters in Ghana, Hyde Homes aim at pushing barriers beyond the status quo with daring architectural designs and competitive value propositions.
Property development is at the core of Hyde Homes.
We offer high-performing property solutions built around a culture of Innovation and excellence.