It is 2025, and more and more Kenyans are looking for means to invest in sources that earn them both active and passive income streams.
Away from the Money Market Funds, mortgages have emerged as one of the alternative viable sources of investment that could bring you a steady income. In Kenya, mortgage investing simply means putting your money into home loans and earning from the interest paid by borrowers. This can be done directly or through institutions that deal with mortgages.
What Mortgage Investing Means
A mortgage is a loan someone takes to buy property, using the property itself as security, with the buyer repaying the loan in monthly instalments, which include the money borrowed and interest. As an investor, you help fund these loans and earn a share of the interest.
Ways You Can Invest in Mortgages in Kenya
Mortgage-Backed Securities or Bonds
This is offered by banks or the Kenya Mortgage Refinance Company (KMRC). You pool money with other investors, and the funds go into home loans, giving you the opportunity to earn interest regularly.
SACCO Mortgage Schemes
Some savings and credit co-operatives use members’ money to fund home loans. The interest they collect is paid back to members as dividends.
Private Lending Partnerships
You can partner with banks, microfinance institutions, or housing co-operatives to finance mortgages and share in the returns.
Seller Financing
If you own property, you can sell it and allow the buyer to pay in instalments, effectively becoming the lender. By this, you are simply an investor in the mortgages.
Mortgage REITs
You can invest your money in Real Estate Investment Trusts that focus on mortgage lending. They collect investor money, issue loans, and pay returns from the interest earned.
Types of mortgages
It is important to take time and understand the different types of mortgages before choosing one that best fits your needs.
The fixed-rate mortgage has unchanged interest rates throughout the mortgage term and shields you from market fluctuations.
Adjustable-rate mortgages (ARM) have interest rates that fluctuate over time. The initial interest rate is relatively low and remains unchangeable, but is adjusted for a certain period based on an index such as the London Interbank Offer Rate and the Central Bank of Kenya (CBK) rate. The best type of mortgage is one that best suits your financial situation, according to financial experts.
How the Process Works
- You invest your money directly or through a financial institution.
- The institution issues home loans to qualified buyers.
- Borrowers make monthly repayments.
- You earn interest from those repayments.
- If someone defaults, the lender can repossess and sell the property to recover the money.
How Much You Need to Start
The beauty is that you do not need millions to begin. Some SACCOs and bonds allow investments from as little as Ksh50,000. REITs and KMRC-linked products may require more, often between Ksh100,000 and Ksh500,000.
Why It Can Be a Good Investment
- Steady and predictable income.
- Backed by property, which adds security.
- A long-term way to build wealth.
What to Watch Out For
- Some borrowers may default on payments.
- Investments may be tied up for years, so your money is not easily accessible.
- Interest rate changes can affect your returns.
Tips for Getting Started
- Work with regulated institutions like KMRC, licensed REITs, or reputable SACCOs.
- Read and understand the terms before investing.
- Spread your investments to reduce risk.
With Kenya’s growing demand for housing and the affordable housing scheme, mortgage investing is becoming more attractive. If done carefully, it can give you reliable returns while also helping more people own homes.
