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Saving For a Mortgage Deposit? All You Should Know in Advance
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Saving For a Mortgage Deposit? All You Should Know in Advance

This article is part of our Money254 Partner Series produced in partnership with Absa Bank Kenya to celebrate the Absa Mortgage Month of March. For more on Money254’s editorial policy, read here.

As you grow older, start a family, and start realising that stability is becoming more important than ever before, owning a home becomes a vital investment decision.

To many, owning a home is the ultimate embodiment of financial security; your family has a place to call home, not just a house, you no longer have to deal with landlords and importantly, you get to build wealth over time by leveraging your home equity.

But buying a home is expensive. According to 2022 data by realtor HassConsult, the average cost of a standalone family house rose by 10.5% in the 12 months leading to June 2022 in Nairobi.

Over the same period, the average price of a standalone house in Lang’ata rose to Ksh35 million (12.5%), Ksh59.2 million in Westlands (7.9%), and over Ksh100m in the diplomatic blue zone like Nyari (5.1%) and Gigiri (1.6%).

Buying a home requires extensive planning and can be costly, making it out of reach for many Kenyans. But saving to buy or build a house while still paying rent can take years, if not decades. As a result, more people are considering mortgages as an alternative means of homeownership.

A mortgage, while offering the fastest route to owning a home, also requires a significant cash deposit that can rise to the millions depending on your desired property value and lender of choice.

To buy a Ksh10 million two-bedroom apartment using a mortgage, you will require a deposit of Ksh1m or more, depending on your lender. To reach that amount, you will need a smart savings plan.

Read Also: How to Save Ksh1 Million in Kenya When Your Monthly Salary is Ksh80,000 - Ksh100,000

This article will explore what a mortgage is, how much deposit you need, and how you can start saving for your homeownership goals while still paying rent.

What is a Mortgage?

A mortgage is a loan from a lending institution such as a bank or Sacco used to purchase a home. It involves paying a deposit known as a down payment which will typically equal to at least 10% of the property’s value, with the financier covering the rest. You will pay the remaining balance plus interest in monthly instalments for a period of between 5 to 30 years.

You must pay a deposit to have equity in the home from the start. You will co-own the property with them. As you pay off the loan, you will get more home equity. The house will be 100% yours when you pay the last instalment.

Therefore, if you've been considering getting a mortgage, you must first save for a deposit. That is unless you qualify for 100% financing as, for example, offered under Absa Home Loans for loans below Ksh10 million.

The process of getting a mortgage in Kenya. Source: Absa Bank
The process of getting a mortgage in Kenya. Source: Absa Bank

What is a Mortgage Deposit

A mortgage deposit is a homebuyer's initial payment to secure a mortgage. It is a crucial component of the home-buying process, representing the minimum amount you need before starting your loan application.

While many new buyers assume this only includes the down payment, it encompasses additional expenses sometimes referred to as “closing costs” costs that you also typically have to raise before your mortgage application is completed.

Understanding the actual cost of a mortgage deposit is essential for potential homebuyers to budget and successfully navigate the mortgage process. Many of these costs will be paid to third parties such as valuers, lawyers and government duty.

If you only concentrate on the percentage of the property value you need to raise, you may be surprised to find out that the associated costs add up to a fairly high amount and delay your mortgage approval.

So what are these costs?

Down payment

This is the initial upfront payment you make to equity in the property you want to buy using a mortgage. The amount will vary from lender to lender. For instance, if you take a straight purchase mortgage from Absa Bank, you will need from as low as a 10% down payment, with Absa Bank financing the rest.

Negotiation Fees

These fees cover the cost of processing and underwriting the loan application and can vary depending on the lender. It ranges from 1 to 3% of the loan amount.

Appraisal Fees

These are fees you pay to evaluate the property's value you plan to purchase. They also vary from one lender to another. Absa Bank charges one of the lowest in the market at 0.25% of the property value.

Legal Fees

These are fees associated with the legal aspects of the mortgage process. A lender will require you to use the services of a lawyer that has been vetted and included in their panel. You can choose any lawyer from the lender’s panel and possibly negotiate down the legal fees which are typically between 1% and 3% of the transaction value. Also, it is advisable to have your own lawyer guiding you in this process which may cost you some additional amount in legal fees.

Real Estate Agent Fees

These are the commission charges paid to an agent or broker who assists in searching for and purchasing a property. This fee can range from 1% to 5% of the property’s value. You can eliminate this cost if you use other free routes to identify the property you want to purchase.

Transfer Stamp Duty

This is a tax paid by the property buyer during the transfer of ownership. The amount you pay will depend on the location of your property. In urban areas, it costs 4% of the government valuation of the property and 2% in rural areas.

Stamp Duty on Charge

This is the tax payable for taking out a mortgage loan and differs from transfer stamp duty. It is 0.1% of the loan amount.


When taking a mortgage, you must buy insurance premiums, including home, fire, and loan protection insurance. These are also recurring annual costs. 

Depending on the lender, there may be additional costs to incur in the mortgage process. The best thing to do when you want to begin the home-ownership journey via the mortgage route is to talk to your lender and be informed of all the possible costs.

To visualise what some of these costs may look like as well as how much you would need to be repaying monthly for your mortgage, try out the Absa Home Loan Calculator which will give you a breakdown based on the values you enter.

How Much Will You Need For a Mortgage Deposit

The total amount you will need for a mortgage deposit will be the sum of the down payment (for example, 10% of the house's value) and all the other costs associated with the application and approval process - some as discussed above. These costs can rise to an additional 10% of the transaction value.

To be safe, it is advisable to save at least 20% of the value of the house you intend to purchase. For example, if you plan to buy a Ksh20m house, save a minimum of Ksh4m.

You should note that the lender will have the final say in how much you pay for the down payment and what you qualify for. This will be based on their assessment of your creditworthiness and other internal considerations at the lender’s discretion.

Before you start saving, you must know the amount you need for the mortgage deposit. This will help you set realistic and achievable goals. It will also help you decide how you will save or invest to accomplish that goal.

Here are the main factors you need to consider before you start saving for a mortgage deposit:

1. The Price of The House: How much do you want to spend on a house? The best way to know this is to approach a lender and get approved. They will assess your financial health and give you a figure. The price of the house will determine your mortgage deposit - the higher the price, the higher the deposit. With Absa Home Loans, you can get a response on your mortgage application in just 48 hours and start planning.

2. How Much You’re Willing to Pay: Lenders will consider an array of factors to determine how much you will pay for the down payment. Nevertheless, what the lender tells you is the minimum, you can opt to pay an even higher amount to reduce the loan amount you need to borrow.  

While you can decide how much to pay, it can't be lower than the lender's minimum. Generally, the larger the down payment, the higher the likelihood of better loan terms and since the loan amount is lower, the lower will be the total cost of the loan.

3. Your Creditworthiness: Your credit score and history will typically affect all aspects of your mortgage, from interest to the down payment amount. A good credit history could lower the down payment required and give you an upper hand during loan negotiations.

4. Your Debt-to-Income Ratio (DTI): This refers to the percentage of your monthly gross income that goes towards paying debts. It may determine whether you will get approved, how much down payment you will be required to raise and ultimately, your monthly repayments. The DTI measures your ability to manage monthly mortgage payments. Typically, the lower your DTI, the lower your down payment.

5. Your Income: Lenders will consider how much you bring home and, importantly, how stable your income is when deciding the minimum down payment. You will have to produce previous pay slips, and if you are self-employed or work as a freelancer, you need to show tax returns that reflect self-employment earnings for the last 12 to 24 months. You can lower your down payment if you convince the lender you have a reliable and stable income source(s).

6. Your Relationship With the Lender: How well does the lender know you, and have you been a client for a long time? If you are taking a mortgage from your primary bank or Sacco, the lender will have enough data on you and might offer you better terms, including a lower down payment. Nonetheless, you should always ensure to shop around and compare lenders to get the best deal. You can approach any lender and your bank and financial statements will vouch for you. Generally, it may not be very consequential whether you are an existing customer or a new client to the bank as long as you have a verifiable credit/financial history.

7. Assets and Cash Reserve: If you can show a lender you have other assets and enough cash reserves to cover mortgage repayments in case of an emergency, you can technically negotiate for lower down payments. This will show lenders you are less likely to default as you can liquidate and/or have backup plans.

8. Get a Cosigner: This will improve your chances of getting a better deal, including paying a lower down payment. If you are a two-income household, your spouse can be your co-signer. Make sure to discuss this with the lender to know if you can take advantage of co-signing and free up cash to pursue other investments.

9. The Mortgage Loan Term: The lender will have the final say on how long the mortgage term will be and they use different factors to determine this. For example, Absa Bank offers a repayment period of up to 25 years through the Absa Mortgage Straight Purchase plan. Typically, the longer the repayment term the lower the down payment will be.

How to Save for a Mortgage Deposit

Take Advantage of Compound Interest

Taking advantage of compound interest can help you achieve your mortgage deposit savings goals faster. By investing in high-return accounts that offer compound interest, such as money market funds (MMFs), target savings accounts, or digital savings accounts, you can earn interest on your initial deposit and the accumulated interest.

For instance, Absa offers a Digital Savings Account that offers a maximum annual interest of 9% compounded monthly. This compounding effect can significantly increase your savings over time.

Remember that researching and comparing different investment options is essential to find the best fit for your financial situation and risk tolerance.  

Have an Emergency Fund

Having an emergency fund is crucial when saving for a mortgage deposit. It can prevent you from tapping into your savings account in case of unexpected expenses, which could derail your progress toward your savings goal.

An emergency fund should cover three to six months' living expenses and be kept separately from your savings account. This will help you stay on track with your savings plan and ensure you are prepared for unforeseen circumstances.

By having a cushion to fall back on, you can focus on your savings goals with peace of mind, knowing that you are financially prepared for any emergencies that may come your way.

Lower Your Debts

Lenders consider your debt-to-income (DTI) ratio and credit history when deciding whether to offer you a mortgage. By reducing your debts, you can lower your DTI and potentially reduce the amount you need for a down payment.

Additionally, paying down debt can improve your credit score, which shows lenders that you are a reliable borrower. This can potentially help you secure a better interest rate and loan terms. By prioritising debt reduction, you can improve your financial standing and increase your chances of successfully saving for a mortgage deposit.

Save Money Consistently

Consistent saving is critical to achieving your mortgage deposit savings goal. One way to ensure consistency is by automating your savings such that a set amount is transferred from your paycheck to your savings account each month.

Another strategy is to pay yourself first. This involves allocating a portion of your income towards your savings goal before you spend any money. By incorporating these practices, you can develop a strong saving discipline that will help you stay on track to reaching your goal.

Consistency is critical, so even if you start with small amounts, it's essential to maintain a steady pace of saving. It will ensure you build momentum and reach your savings goal within your desired timeframe.

With the Absa Digital Savings Account, for example, without ever needing to visit the branch, you can set up an account, track your progress, and create standing orders to fund your account from the convenience of your mobile device.

Lower Your Expenses

Lowering your expenses is essential when saving for a mortgage deposit. It means making conscious decisions about where your money goes and cutting back on unnecessary spending.

One effective strategy is tracking your expenses using a budget and identifying areas where you can reduce costs, including finding more affordable housing options.

Another strategy involves living below your means. This practice can free up more money you can direct toward your savings goals. This will help you build a solid financial foundation and ensure you can achieve your dream of homeownership sooner.

Increase Your Income

Increasing income allows you to save more, pay off debts, and lower your DTI. All this makes you attractive to lenders when ready to take a mortgage. Increasing your income can also help you qualify for a larger mortgage, allowing you to buy a more expensive home or pay a larger down payment.  You can increase your income by getting a second job, freelancing, or starting a side hustle among other things.


As you embark on your journey to saving for a mortgage deposit, ensure that you have a solid plan.

After getting a quote from your lender of choice, first, create a budget and savings plan to determine how much you can save each month towards your down payment.

Then, consider opening a dedicated savings account such as the Absa Digital Savings Account that offers competitive rates, no withdrawal limits, and has no account charges.

Next, you should research and understand your homeownership options, such as the different types of mortgages, interest rates, and repayment terms. This will help you make an informed decision and choose a mortgage that aligns with your long-term financial goals.

Finally, consider hiring a financial and real estate expert (such as a real estate lawyer) to hold your hand. They can help you get the best deals and avoid pitfalls that could cost you.

Now, what if you could qualify for 100% financing? The only way to know this is to speak to your lender of choice. With Absa Home Loans, you can get a response to your mortgage application in 48 hours!

Why not get started today?

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Tony Mukere is the branded content lead at Money254. He is a trained journalist with a passion for impactful storytelling. Before joining, he worked as an editor at, and as a reporter at Connect with Mukere on Twitter.

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