Taking a mortgage in Ghana for a house is becoming more commonplace amongst real estate developers. As the Ghanaian banking system grows stronger, more and more people can take advantage of a mortgage as a financial instrument for a house. What is a mortgage exactly?
“A mortgage is a debt instrument, secured by the collateral of specified real estate property, which the borrower is obliged to pay back with a predetermined set of payments.” – Investopedia
We will be looking at some of the benefits of taking a mortgage in Ghana so you can judge for yourself whether a mortgage will be best for you at the moment. To mortgage a house in Ghana is a big decision that must be taken with careful consideration. It’s not as simple as the traditional build-and-pay-later model we have as an alternative in Ghana.
Pros
More Liquidity
Taking a mortgage means that you do not have to pay fully for your house up front with cash. This allows you to have more cash in the bank to focus on other areas of the house such as furnishing and any other finishing touches to the house.
Guarantee
When you apply a mortgage to your house, what that means is that the bank will settle the payment so you can pay the bank back over time. This is a guarantee for your house purchase.
All you have to do is to pay up your mortgage interest rate on time to fully claim your house. The mortgage is a preferred financial instrument for most home seekers.
Tax Benefits
In parts of the world, mortgage payments normally come with tax reliefs and other tax benefits. In Ghana, there are some tax benefits that, especially, companies can benefit from. Companies buying land or property are advised to use mortgages to benefit from tax reliefs.
Foreigners have Access
Most mortgage schemes in Ghana allow foreigners to access them. Foreign nationals who are living in Ghana and would like to invest can invest in property through mortgages and if they are lucky, they get to pay in their own currency.
Cons
Interest Repayments
Repaying a loan is bad enough but repaying a loan with interest that has accumulated interest can be challenging. The average interest on any mortgage payment is about 3-10% each year.
You should go through the contract with your bank properly to ascertain the interest rate and if you can comfortably afford it. Depending on the interest rate and the period of repayment, you might be paying up to 50% more in the end.
Preference for Cash in Ghana
The Ghanaian economy is heavily dependent on cash, with very little room for credit. Developers also require cash for their operations and, as such, will prefer to give out a property to whoever has the cash available.
Mortgages are more of a second option for property developers.
Slower Closure of Deals
Mortgage payments normally require a lot of paperwork as opposed to cash payments. If you want to own and move in as soon as possible, a cash payment would be best. However, you should take your time when buying a property in Ghana. Do all your due diligence before you make any form of payment?
Requirements
Some banks have strict requirements for people who want to access a mortgage. Apart from the personal details, applicants will have to prove that they have the financial ability to access the mortgage.
Some banks require applicants to be members of the bank for a certain period prior to applying for a mortgage and for business owners, they may require the last 3 years certified audited accounts or at least 3 years-worth of copies of individual income tax returns. A down payment may also be required from certain banks.
Apart from a 100% mortgage in Ghana, you could also have a hybrid system where some amount is paid in cash while the other is paid through a mortgage.
Conclusion
Knowing the pros and cons of mortgages in Ghana helps you better understand the real estate market in Ghana and also make better-informed decisions whether you are a national or a foreigner. Buying a house in Ghana through a mortgage could be a blessing or a curse, depending on your financial situation. Think thoroughly before you make your decision.