By Dennis Isong
Recently I was invited by a friend of mine to a housewarming party as a guest. He had just purchased a beautiful piece of property at Lekki, and he wanted to celebrate with his friends and family.
Guests at the celebration party gave their usual “congratulations”, and “happy for you, man” speeches, but a mutual friend of ours decided to break the ice, and ask the question everyone really wanted to ask. How much was the property worth? Is it a reply? 60 million naira. Considering my friend was a young Professor in a private University, and I know his monthly take home pay, I could not help but ask how he was able to raise the funds to finance the project. He gave me a straightforward answer, “mortgage loans”.
In a country where around 24 million of the population are homeless ( an estimated 13 percent of the population), with the homeless situation in Lagos worse than any other states ( about 70 percent live in “informal settlements”). The concept of mortgage loans is foreign to the average Nigerian.
Though I must admit that there have been recent improvements in the Housing sector of the country down the years, a vast majority of Nigerians still don’t know how to access housing loans. There are a number of reasons for this. For one, like I have earlier stated, most citizens are ignorant of the concept of mortgages, others are scared of acquiring any kind of debt, and mortgages means big debts, and for a large majority of Nigerians, the knowledge and skills required to access mortgage loans is lacking.
For these above stated reasons, I am writing this article to show Nigerians how to access mortgage loans. After reading this article, It is my hope that you would understand what mortgages are, and how to benefit from them
WHAT IS A MORTGAGE?
A mortgage is a contractual agreement which lets you borrow from a bank or similar establishment, with the aim of purchasing a property. It allows you to pay for a house in instalments. Put quite simply, with the aid of mortgages, you can get a loan, purchase a property, and make repayments over a certain period of time. This period of time could be 10, 20, or even 30 years, depending on the agreement signed.
The Nigerian housing problem has opened doors for both private and government institutions to make access to loans more readily available than it used to be in Nigeria. If you stay in any of the big cities in the country ( Lagos, Abuja, Port Harcourt), then you have an easier chance of accessing mortgages, due to structures in place to make proper documentation, and verification by banks and other financial institutions. Also the National Housing Fund (NHF) is one of several government agencies set-up to help solve the Housing shortage in the country. They offer one of the best mortgage rates, as long as you are qualified to access their loans
WHAT YOU SHOULD KNOW BEFORE APPLYING FOR MORTGAGE LOANS
Mortgages are loans, and as you know all financial loans come with interest rates. For commercial mortgage institutions, a normal mortgage interest rate should be around 15-20 percent in Nigeria. For those seeking mortgage loans from NHF the interest rate is between 7-10 percent.
Interest rate payment aside, it is necessary to have available a certain percentage of the total amount required to buy a property. This amount is your equity, and can between the ranges of 20-70 percent of the total cost of the property. This depends on the mortgage institution you are dealing with.
A factor you should not downplay is the duration of the loan; this is the time needed to repay a loan. Most mortgage institutions in Nigeria offer a maximum amount of 20 years for loan repayments. Some could offer more ( rarely), and some offer less. You should decide which loan tenure would be favorable to you.
The most important factor mortgage institutions take into consideration before they can approve your loan request is your income level. They want to ascertain the following;
- Your Bank statement of account ( at least a year).
- Monthly Income.
- Monthly expenditure.
- Check your existing. debt profile.
- Appraise the value of the property you are interested in.
- Ascertain if you can afford the mortgage.
These factors would determine if you are eligible or qualified to get a mortgage
WHERE TO GET MORTGAGE LOANS IN NIGERIA
For Nigerians, there are three main ways you can assess mortgage loans in the country
COMMERCIAL MORTGAGE INSTITUTIONS
This kind of mortgages can be found in almost every bank you walk into, since most banks have arms dedicated to home loan financing. A little online search will give you all the information you need from each bank.
PRIMARY MORTGAGE INSTITUTIONS
These are organizations established with the sole purpose of providing Nigerians access to mortgage loans. If you are really interested in these organizations, it is advisable to stick with those accredited by the central bank. They also offer cheaper rates compared to Banks.
THE NATIONAL HOUSING FUND (NHF), AND FEDERAL MORTGAGE BANK OF NIGERIA (FMBN)
Are programs created by the federal government to give Nigerians access to less expensive, long-term mortgage loans. Like I stated earlier, the NHF provides one of the cheapest interest rate repayment plans. If you do meet the requirements, and become eligible for home loans with NHF, you will be able to access up to 25 million naira to purchase a property.
TYPE OF MORTGAGES
We Will be listing three types of mortgages used by mortgage institutions in the country. I should state now that before you begin processing your loan application, it is very important you assess your options properly, and know the pros and cons of all mortgage types.
FIXED RATE MORTGAGE
As the name implies, the interest rates are fixed for loan repayment throughout it’s tenure. Your payments are predictable for the next 10, 20, or 30 years.
Here you only pay your interest rate monthly, and towards the end of the loan you make a lump payment.
This type of mortgage is also known as Adjustable Rate Mortgage (ARM). Here the mortgage institution adjusts the interest rate at various times throughout out it’s tenure, based on what was agreed upon before the commencement of the loan.
The secret to quick mortgage loan repayments is to make sure the purchased property starts generating revenue on time to finance the mortgage.
Dennis Isong Helps Individuals Invest Right In Real Estate.For Questions On This Article Or Enquiring About Real Estate Email: Dennis@Landproperty.ng or Whatsapp/Call +2348164741041
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