Understanding Mortgage in Nigeria: A Snapshot

• 2020-03-19
• RatesNG

Owning one's home has always been the dream for most people. In the past, mortgages in Nigeria were foreign and only available to the ultra-wealthy; however, it is gradually becoming a norm and accessible to the middle class. Mortgage permits for the payment of a house or property in installments. This is a solution for people who wish to become landowners but cannot afford the purchase cost upfront.

What is a Mortgage?

A mortgage is a loan from a financial institution that assists borrowers purchase landed properties. The property secures a mortgage; hence, there is no need for collateral, and a financial institution can sell the property in case of a default.  Mortgage transactions are bounded by terms and conditions borrowers have to adhere to throughout the mortgage.  The terms and conditions vary from institution but fundamentally, it details the; loan duration, interest, fees, payment structure, and the rules of engagement.

In Nigeria, mortgages are easily obtainable in bigger cities such as Lagos and Abuja, unlike in other states due to the complex nature of mortgages, the verification process, and the lack of adequate infrastructure. Before banks agree to lend you money to buy a house, that house will need to be verified, and the buyer must have the proper documentation.

Mortgage Lenders in Nigeria?

In Nigeria, the housing finance market is primarily dominated by three sets of financial institutions:

Federal Mortgage Bank of Nigeria (FMBN)

Federal Mortgage Bank of Nigeria through its National Housing Fund (NHF) scheme mobilizes funds from statutory deductions and contributions of workers (both civil servants and those working in the private sector), banks, and insurance companies in Nigeria. The funds in the pool are long-term funds that contributors within this scheme can borrow at a low-interest rate. FMBN manages this fund. ?

Nigerian Workers within the private and public sectors with minimum earnings of N3,000 are mandated to contribute to the funds. If you are not currently doing so, see your Human Resources department at your organization on how to start your contribution.

Primary Mortgage Institutions (PMIs)

A Primary Mortgage Institution (PMI) are organization licensed for the specific purpose of providing mortgage transactions in Nigeria. These transactions include the provision of loans or credit facilities to individuals or businesses to build, improve, or refinance landed properties.

Commercial Banks

Currently, not all commercial banks provide Mortgage loans to their customers; as most commercial banks prefer short-term loans.  Some commercial banks have created separate subsidiaries that deal with mortgage-related transactions such as Union Home and UBA Homes to compete with the PMIs.

Mortgage Loan Eligibility

To be eligible for a mortgage loan in Nigeria, a buyer must meet the following criteria:

• An applicant of a Mortgage Loan in Nigeria should not be less than 23 years or more than 60 years for a full-time employee and 65 years for Self- employed.
• Earns a minimum Salary of N300,000 PA
• Fulfill the financial provider's internal requirements.

Requirements Needed to Access a Mortgage Loan

The requirements for getting a mortgage in Nigeria vary from Institutions, but include and not limited to the following:

• Completed application form
• Copy of documents of the property you want to purchase
• Three years tax clearance certificate
• Copy of payslips for the last three months
• Your bank account statement for the previous six to twelve months.
• A means of identification such as International passport, National ID card, Driver's License
• Utility bill
• The applicant's salary accounts domiciled with the bank or mortgage institution
• Letter of employment
• An introduction letter from your employer is needed to ensure that you are indeed an employee of the company.

In conclusion, a mortgage loan is not a transaction you want to embark on lightly, do thorough research, employ the services of a lawyer, and be sure you have the financial capacity to support the purchase.

 

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