How Mortgages Work In Nigeria

A mortgage is an agreement that enables an individual to buy a house with a loan from a bank or mortgage lender.

Acquiring a home via private means can be daunting and may take a long time to accomplish. Individuals and businesses use mortgages to make large real estate purchases without paying the entire purchase price upfront. Over many years, the borrower repays the loan, plus interest, until she or he owns the property free and clear.

How Does It Work

Mortgages are loans, hence, they come with interest rates. For the National Housing Fund, the interest is fixed at 6% per annum. While for commercial lenders, mortgage rates range between 15% – 25%.

Who Can Apply

According to the National Housing Fund, all Nigerians above the age of 21 years and in paid employment are entitled to a low-interest, government-funded loan. Such a person must be earning N3,000 and above per annum. Members of the scheme contribute 2.5% of their monthly salary to the fund through the Federal Mortgage Bank of Nigeria

Important Things to Consider When Applying for the Loan

Equity: Apart from the interest, a potential buyer must have equity readily available. Equities are a certain percentage of the total amount of money needed for the purchase of a home. Equities generally range between 30% – 70% of the total cost of the home

Tenor: The tenor is the length of time required to pay back the mortgage. In Nigeria, the maximum amount of time given is 30 years for the NHF.

Sources of Mortgages for Nigerians

Primary Mortgage Institutions – The Central Bank of Nigeria describes Primary Mortgage Institutions as companies licensed to carry out mortgage businesses in Nigeria. They grant loans to build or purchase new homes and improve existing ones

Federal Mortgage Bank – The Federal Mortgage Bank of Nigeria and National Housing Fund are federal programs meant to give Nigerian’s access to cheap long-term funds so they can build or develop their own homes.

Commercial Mortgage Facilitators – Almost every bank has a mortgage arm from which clients can obtain a loan for property purchase.

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