Can You Get a Mortgage Without Savings? Borrowing for the Down Payment

When buying a home with a mortgage, banks usually require a down payment. For many people, saving this amount is a challenge, which leads to the idea of taking a separate loan to use as the first payment. Let's look at how realistic this is and what the risks are.

Is It Possible to Use a Loan for the Down Payment?

Theoretically, yes. In Kenya, some borrowers do take out a personal loan to cover the mortgage down payment.

However, in practice this is a difficult and risky step. Banks assess not only whether you have the deposit but also your overall financial burden. Before making such a decision, it is important to honestly evaluate your capabilities.

Why Banks May Refuse

The main reason for refusal is a high debt burden.

If after taking out:

• a mortgage,
• and an additional loan,

too large a portion of your income goes toward repayments, the bank will likely reject your application.

Generally, a safe level is when no more than 30–40% of your income goes to loan repayments. In some cases, up to 50% is allowed, but this carries higher risk.

How Borrowers Typically Act

Since the money for the down payment is only needed at the transaction stage, some do the following:

• first get a mortgage pre‑approval,
• then take out a personal loan,
• use it to make the down payment.

But there is an important catch.

Checks by the Bank

Banks in Kenya check your credit history before issuing a mortgage. If it turns out that the down payment was funded by a loan, the bank may:

• refuse the mortgage,
• or reduce the approved amount.

Hiding this fact is practically impossible.

Impact of Your Credit History

A good credit history significantly increases your chances of approval. Important factors include:

• no late payments,
• careful repayment of previous loans,
• stable income.

Before applying, it is useful to check your credit history to understand your chances.

An Alternative Approach

Sometimes a different approach is used:

• one person takes out the mortgage,
• another (e.g., a spouse or relative) takes the personal loan.

In this case, the debt burden for the mortgage applicant appears lower, which may increase the chances of approval. However, the overall family budget still matters, as payments will come from the same household income.

Main Risks

This method carries serious financial risks.

High Debt Burden

Personal loans are usually issued for a short term (up to 3–5 years), so their payments are quite large.

Double Obligations

You will have to repay at the same time:

• a mortgage (long‑term),
• a loan for the down payment (short‑term).

Risk of Losing Your Home

If you face financial difficulties, there is a risk of:

• late payments,
• damage to your credit history,
• in the worst case – losing the property.

Summary

Taking a loan for the down payment is possible, but it is a risky strategy. Before deciding, it is important to:

• assess your debt burden,
• calculate future payments,
• have an emergency fund.

A safer option is to save part of the amount yourself or use support programmes if they are available.