The growth of mortgages in Ghana

By Anna and Victoria Agyekum, founders and directors of On Point Property.

Owning a home in Ghana has, for as long as we can remember, been associated with building a house of one’s own, either on land inherited from family or land bought specifically to build on. However, at On Point Property, we have seen a noticeable shift in the trend as the African diaspora, fuelled by the dream of owning a home on the continent but without the stress of taking on the project themselves, increasingly explore the options to buy ready-built properties on the continent.

This change is driven by the introduction of mortgages, a relatively new concept in Ghana, which has brought about more affordable options when it comes to buying. The landscape of Ghana has notably changed with the quality of properties being built which in turn has provided confidence that some of the best home building is being done by professional real estate developers.

Ghanaian banks have responded to the growing demand for mortgages by designing and offering a new product called diaspora mortgages. This has significantly reduced the average interest rates for mortgages, making it accessible for buyers to invest in real estate in the country.

The average loan rate for indigenous Ghanaians hovers around 27%, whilst diaspora mortgage rates are on average 11.5%.

The diaspora mortgages are based on foreign currencies, such as USD or Sterling (the currency which the applicant earns), which provide more stability compared to the local currency, the cedis.

While the interest rates for these diaspora mortgages may still be higher than what many are accustomed to, they present an opportunity for individuals to become homeowners without having to pay the full purchase price upfront.

To qualify for a diaspora mortgage, individuals must prove their Ghanaian heritage, such as having Ghanaian parents or being married to a Ghanaian. Additionally, their income, current liabilities, and credit score are assessed. The mortgages typically cover 70% to 80% of the property’s value, requiring buyers to provide a deposit of at least 20% to 30%. The maximum mortgage term is 20 years, limited to the retirement age.

Raising the lump sum needed for the deposit can still be a challenge for buyers. In response, many property developers offer payment plans to assist buyers in paying the upfront deposit, typically requiring a $5,000 reservation fee followed by the balance of the deposit. The mortgage is paid once the property is completed. The length of the payment plan for the deposit will depend on whether the property is purchased off-plan or during the construction stage. If the property is already completed, there will be a shorter timeframe to pay.

For foreign investors, the current options are limited to purchasing properties with cash, as there are no mortgage options available. However, there is anticipation for a new product called Heritage Mortgage, which will soon be introduced by Access Bank (Ghana) Plc. This mortgage option aims to cater to a wider pool of investors without direct heritage ties to Ghana, allowing them to secure a mortgage based on their credit score. This property purchase will provide them with a direct link to Ghana without any ownership restrictions. All properties in Ghana are sold under a leasehold, with a maximum lease term of 50 years for foreign buyers and 99 years for Ghanaians. All leases can be renewed.

This shift in the narrative surrounding homeownership in Ghana signifies a changing mindset and an increasing acceptance of mortgage loans. The influx of the Ghanaian diaspora and their desire to invest in real estate has paved the way for more accessible financing options. By embracing mortgages, Ghanaians and now even foreign investors can fulfill their dreams of owning property in Ghana, making homeownership a more viable and attainable goal for all.