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Mortgage financing refers to funding the purchase of a property, land, or other types of real estate or maintenance of such using borrowed money (loan) and in the case of Zimbabwe borrowed usually from a Building Society though all Commercial banks can also provide such funding.
The borrower commits to pay the lender over time, typically a series of regular payments that are divided into principal and interest. The property serves as collateral to secure the loan.
Individuals and businesses use mortgages to buy real estate without paying the entire purchase price upfront. The borrower repays the loan plus interest over a specified number of years (usually 10 - 25 years in Zimbabwe), thereafter they will have full ownership of the property. If the borrower fails to pay back the mortgage in full, the lender can foreclose on the property.
Borrowers apply for a mortgage through their banks and they have to meet several requirements before their application is considered and approved or declined. There are a number of considerations to qualify and they vary depending on the bank approach.
The most common requirements in Zimbabwe are as follows:
- Proof of Residence
- Proof of Income
- Title Deed for the subject property (being purchased or improved)
- Agreement of Sale for the subject Property.
- Bill of Quantity (for building or improvements loan)
- Copy of Approved Plan (for building loan)
- Loan Application Fee/Establishment Fees
- Mortgage Loan Deposit – usually 10-20% of the loan amount/purchase price.
- Legal Fees – to cover the costs of bond registration and conveyancing.
- Insurance Cover for the Mortgage Loan
Mortgage applications go through a rigorous underwriting process before they reach the closing phase. Most banks require that the total monthly mortgage loan repayments should not exceed 30-40% of gross monthly income so that you will not be financially burdened and fail to repay the loan.
Mortgage types vary based on the needs of the borrower, the most common types of mortgages in Zimbabwe are designed to provide finance to clients who would want to buy, build or renovate hence we have the following prevalent types of mortgages :
- Building Finance - suitable when building a new house/property
- Property Purchase - suitable for purchasing an existing residential property
- Property improvements - suitable to renovate and/or improve a property
- Equity Release - available to individuals/companies who own a property and would like to borrow funds against the property.
- Diaspora Mortgages - targeted on Zimbabweans based outside the country when buying properties within Zimbabwe.
Recently most banks have resumed issuing mortgage loans though most sellers are still reluctant to accept them, if you think you qualify for such you can check with your bank and visit www.property.co.zw for many options you could choose from.
