Even when home ownership appears to be a major challenge for many Nigerians especially those residents in the urban areas, there are available options to own your house without having to pay in millions of Naira instantly. One of such options is mortgage loan for home ownership.
Mortgage loans in Nigeria are financial instruments that allow individuals to purchase homes by borrowing money from a bank or a lending institution. Here are some important things to know about mortgage loans in Nigeria:
1. Eligibility Criteria: Banks and lending institutions have specific eligibility criteria for granting mortgage loans. These criteria may include factors such as your income, credit history, employment stability, and the property’s value. For instance, to qualify under the various mortgage scheme with the Federal Mortgage Bank of Nigeria (FMBN), one is required to be a contributory member to the National Housing Fund (NHF).
2. Down Payment: Generally, you’ll need to make a down payment on the property you’re purchasing. The down payment is usually a percentage of the property’s value, and the specific amount can vary. In Nigeria, the down payment can range from around 10% to 30% of the property’s value. For the FMBN, there is product that requires zero payment of equity otherwise known as “Down Payment.”
3. Interest Rates: Mortgage loans come with interest rates that determine how much you’ll pay in addition to the principal amount borrowed. Interest rates can be fixed or variable. It’s crucial to understand the terms and conditions of the interest rate, including whether it’s subject to change over time.
4. Loan Term: The loan term refers to the duration over which you’ll repay the mortgage loan. In Nigeria, typical mortgage loan terms can range from 10 to 30 years, depending on the lender and your agreement.
5. Repayment Structure: Mortgage loans can have various repayment structures. Some loans might have equal monthly payments (amortizing loans), while others might have lower initial payments that increase over time.
6. Collateral and Security: Mortgage loans are secured by the property itself. If you fail to make the required payments, the lender has the right to seize the property through foreclosure to recover their investment.
7. Documentation: To apply for a mortgage loan, you’ll need to provide various documents, including proof of income, employment history, identification documents, and details about the property you’re purchasing.
8. Processing Fees: Mortgage loans often come with processing fees and administrative charges that you’ll need to pay. These fees cover the cost of processing your loan application and other associated tasks.
9. Prepayment and Penalties: Some mortgage loans might have prepayment penalties if you pay off the loan before the agreed-upon term. Make sure to inquire about this aspect before finalizing the loan.
10. Property Appraisal: The lender typically conducts an appraisal of the property to determine its value. This is to ensure that the property’s value aligns with the loan amount being requested.
11. Insurance Requirements: Lenders may require you to purchase property insurance to protect against damage or loss. Additionally, mortgage life insurance might be offered to cover the outstanding loan amount in case of your untimely demise.
12. Default and Foreclosure: If you fail to make the required payments, the lender has the right to initiate foreclosure proceedings, leading to the repossession and sale of the property to recover the outstanding debt.
13. Government Programs: In Nigeria, there are various government initiatives aimed at making homeownership more accessible. These include the National Housing Fund (NHF) and the Federal Mortgage Bank of Nigeria (FMBN).
Before taking out a mortgage loan in Nigeria, it’s advisable to thoroughly research the terms and conditions of different lenders, compare interest rates, and seek advice from financial experts. Understanding the intricacies of mortgage loans will help you make informed decisions and choose the option that best suits your financial situation.
Before proceeding with a mortgage for home ownership in Nigeria, it’s crucial to thoroughly research your options, compare lenders, and seek advice from financial professionals to make informed decisions that align with your financial goals and capabilities.