Financial Literacy training for PRAU : 4th October 2019

Hope Ekudu
Head, Business and
Institutional Banking
About Housing Finance Bank
Performance
o Only tier 1 Indigenous Bank (BUBU)
o 9th largest bank out of 24 : Profits (2018)
o 9th largest bank out of 24 : Loans and Advances (2018)

Women in Housing Finance Bank

o Over 50% of the workforce is female
o Representation on the board: 45%
o Representation at Senior management level: 45%

Demographics of Uganda
o Population: 43.8 million
o Female population: over 50%
o Life expectancy: 59 years
o Unemployment rate: 2.3%
So what’s on your Vision board?
How do you achieve your vision?
• Planning and Focus
• Ikigai : Japanese for "a reason for being." What makes your life worthwhile?
Personal Financial Management
1. Determine what you need and what you can do
without (what is important)
2. Raise money to meet your financial goals
3. Prepare a budget which is within your income
4. Keep track of your expenses
5. It’s easy to get into debt but hard to get out
6. Save and invest to grow your earnings: Think
Entrepreneurship
7. If you gamble, you eventually lose
8. Be mindful of the expenditure on dependents
What is a loan?

A loan is money that is borrowed and must be

paid back, usually with interest and other
associated costs such as loan processing costs,
insurance fees, stamp duty etc.
• Most loans must be secured
• Every loan comes with a cost- Total Cost
of Credit and includes the amount you
borrowed + interest + any other
fees/charges
Interest
Interest is the “price” you pay for borrowing money. Interest is the additional money you have to pay to

the person or financial institution that lends you money.

Yearly interest rate: If you took a loan of 100,000/= with 12% interest per year, you would pay an

interest of 12,000/= per year in addition to the 100,000/= that you received as a loan. After one year, you

would therefore have to pay the lender 112,000/= plus any other fees/charges.

Monthly interest rate: If you took a loan of 100,000/= with 12% interest per month, you would pay an

interest amount of 12,000/= every month. Over the year, this would amount to 144,000 in interest only.

You would therefore have to pay back [100,000/= + 144,000/=], which would add up to 244,000/=.
Interest

• Fixed Vs variable

• Flat Vs declining

• For example, if you take a loan of 100,000/= at 10% interest per month and you pay back

50,000/= (plus the interest) after one month, with flat interest you still have to pay 10% of

100,000/= which is 10,000/= in the second month; with declining interest you only pay 10%

of 50,000/= which is 5,000/= in the second month.

 MYTHS & FACTS ABOUT MORTGAGES

• It’s not yet a good time to build or buy a house- Buying a house is kind of like the decision to have kids; if
you wait for the perfect time, it will never happen. The factors surrounding the house and your situation are what
determine whether it’s a bad time to buy or not.
• Mortgages are for the rich- With steady cash flows and planning, any individual can afford a mortgage.

• Obtaining a mortgage loan is complex and confusing. Our HFB sales staff are mortgage experts. They will
walk you through the entire process and explain what to expect, such as the repayments, costs involved,
documents needed etc.
• Renting is cheaper than owning a home - buying a home is usually cheaper over the long run than renting. To
begin with, buying a home allows you to build up equity in the property, whereas the money you pay for rent
doesn't lead to any equity. Every cent you paid to the landlord is gone once you vacate the house.
HOW MORTGAGE FINANCE WORKS
• Bank offers funds in exchange of property title as security for funds given

• For acquisition / construction of property

• Refinance of debt from other lenders

• Equity release i.e. pledge property for cash to be used for other needs

• Ownership rights remains with borrower

• Loan repayments are regular / standard over a period of up to 20 years

• Interest paid on balances outstanding

• Demonstrate regular verifiable income for loan repayment

HOW MORTGAGE FINANCE WORKS
• Repayment may not exceed 35% of gross income or 80% of net rent nor as agreed with employer

• Contribution from the borrower ranges from 0% - 50% depending on the facility sought (CRI)

• Loan costs – Interest and fees like application & arrangement fees, Stamp duty, insurance, transfer fees, CRB,
valuation & survey fees etc

• Grace period – Up to 12 months for construction. Interest is payable monthly during grace

• Partial or full redemption is an option

• Further mortgages / top ups for existing borrowers at favourable terms

 MORTGAGE PROCESS

1. Meet with a bank official for the first time to discuss 2. Bank advisor discusses with you to understand the solution
your needs to meet your needs

To buy Land or Kyaapa loan

To purchase property

To refinance

For equity release

For property construction/ completion

3. Submit required documents for assessment

4. Get your house/property / construction & and loan approval
repay loan
A few tips as we close
• Have a vision board: goals and plans
• Identify that sweet spot; what you are passionate about, are capable of and
which you can earn from
• Take calculated risks, no regrets
• Consult widely and take advice
• Start saving now.. Don’t Procrastinate
• If it is too good to be true, it probably is too good to be true
Head Office
Investment House
Plot 4, Wampewo Avenue, Kololo-
Hope.ekudu@housingfinance.co.ug
0752992026

Tel: 256 417803000

Fax: 256-414-236676
Fax:+256-414-341429
Email: info@housingfinance.co.ug

THANK YOU FOR YOUR ATTENTION