For many, owning a home is part of the middle-class lifestyle or retirement. For most homeowners in Ghana, getting a mortgage seems a remote possibility but it should just be one of the steps it takes to get own that home. Beyond primary residence use of most mortgages in Ghana, you can get a mortgage for Commercial Units, Industrial Units.
Back in the 1930s, if you wanted to buy a house in the US your down payment had to be at least 50 percent and your loan came due in five years - President Franklin D. Roosevelt era. Things are so much better now.
Benefits
Mortgages offer enormous as against the unfounded fears most Ghanaians have for home mortgages. Amazingly enough, it’s more than just a way to pay for a house or commercial property over a period. There are many other benefits to a mortgage that can help you, both immediately and over time.
Here is a small list of how a mortgage can help you:
• Naturally, one of the first and most obvious reasons is because it allows you to buy a house without having to save up hundreds of thousands of dollars or cedis in your bank account. This means homes that would be out of your reach normally are available to you. Taking advantage of leverage.
• Mortgage loans are easily approved since they are secured loans, even if you have a poor credit or no credit history at all - Because the property being financed act as collateral, lowers risk for the lender.
• The interest you pay on a mortgage loan is much lower than that of a personal or business loan. In comparison to unsecured borrowing, mortgages tend to be more favourable i.e. they are available with lower interest rates compared to other types of loans. When you agree a good mortgage deal, the monthly payments will usually work out financially better than rental payments, so you will be saving money over the term that you are occupying the building.
• You get flexible repayment tenures.
• There are many tax benefits that come with a mortgage. Your interest is tax deductible up to certain limits, on your tax return, which is incredibly helpful early on. Being able to save your money this way makes paying off your mortgage easier overall.
• Having a mortgage can help you seem more trustworthy in the eyes of the banks and other non-banks. If you have a mortgage with consistent, on time payments, then you are trustworthy. Therefore, if you are ever thinking of getting a loan for a car or a business venture, the chances are higher that you will get one! It will definitely help with your visa for international travels as well. Always be sure to be on time with your mortgage payments, however.
• There’s equity. Property prices have been on an increasing trend for a long time, so there is a good chance that the value of the property you buy could rise. This could provide you with a lump sum when you sell the property, which you could invest or use as a retirement pot. However, you will be liable to pay capital gains tax on your profit from the property sale.
As you own your home and make payments, your home will accumulate equity. If you buy a $500,000 home with a $100,000 down payment and a $400,000 loan, and the home appreciates 10 percent in one year, you have made a 50 percent profit on your investment. Obviously, this is not a common scenario, but it makes the math a little easier to breakdown. When you finally have your home paid off, you will have a very valuable asset in your possession. Maybe you can sell your home, or leave it to your family someday. After the mortgage, it is entirely up to you.
• Not wasting money on rent. Renting a property, whether it is for residential or commercial purposes is generally seen as ‘dead money’. Instead of paying off the outstanding amount on a property and taking ownership of that property, with renting you are just handing over your money to the landlord. Whilst renting a property may suit a lot of situations, getting a property will leave you with something to show for your monthly payments.
• Make money through renting part of property. If you own the property then you are able to rent additional space or land that is attached to the property. You could make significant additional income by renting out offices, car parking spaces, storage space etc. If you are renting a property then you are generally not allowed to rent out space unless agreed with the landlord.
• More control over building presentation. Your business premises can play a big part in the reputation of your business, particularly if your customers and clients are coming into your premises either to buy products or for meetings. If you have control of the building in terms of exterior displays, decorating, landscaping etc. you have full control over how professional your business is seen to be. If you are renting a property, the landlord has control over key aspects like decor, facilities management, external upkeep and everything else visual about the business. You might not get permission to display your signage how you would like to or customise to your brand colours, for example.
• It is easier to get out of. If you own the property and no longer want it, selling it can be much easier to get out of than some property leases. Property leases are often lengthy and you will find it hard to leave a lease early.
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