How can I own a house with my Sh30,000 monthly income?

Q. I earn Sh30,000 a month. I pay a rent of Sh8,000, my monthly shopping is about Sh6,000, fare to and from work every month is Sh3,000 and my savings come to Sh2,000. I do not really know where the remaining Sh10,000 goes, but I am always broke before the end of the month. How can I fulfil my dream of owning my own home in the next five years?

Dear reader,

Thank you for sharing your financial situation and desire to own a home in five years. You have not provided an indication of your age and family circumstances which are important considerations when providing financial advice.

The figures you have shared indicate that you have a fixed commitment of Sh8,000 per month to rent payment, and a further Sh9,000 towards your monthly upkeep and transport, while you save Sh2000 consistently. You also spend Sh11,000 a month on non-discretionary items.

Your goal to own a home in five years depends very much on the size of investment you wish to make, otherwise you may require more time should the investment not be modest. A home ownership goal can be accomplished either by building your own home or by taking a mortgage on already built property.

Building your own home can be achieved through acquiring a loan from a Savings and Credit Cooperative Society (Sacco) or bank to purchase the plot and subsequently build the structure. The price of the plot could be high or low depending on the location. The construction costs depend on the size of the house (number and size of rooms).

Acquiring a property for a home in suburban areas around Nairobi such as Juja, Kikuyu, Kangundo Road, Ruai, Kitengela, Ngong and Kiserian vary from a low of Sh400,000 to a few millions on average for an eighth of an acre.

The construction cost would vary from about a low of Sh700,000 upwards for a modest two-bedroom unit depending on the distance from the quarry and the quality of building stones of choice and your choice of finishes. The cost of other building materials is relatively stable other than the cost of transporting them.

Assuming a unit costs of Sh2.5 million, with a deposit of Sh250,000 in your hands, you could acquire an affordable mortgage from any one of the providers of affordable mortgages at an average of 9 percent per annum interest rate over 150 months’ loan period.

This will cost you less than Sh9,000 per month, which you can afford with your current income. You can use this to build the property, which will give you flexibility to finish the house at your own pace, and allow you to choose the materials and finishes.

Mr Patrick Wameyo is a financial literacy and entrepreneurship coach at Financial Academy & Technologies. 

To get answers to your personal finance questions, please write to him on    [email protected]