Shelter is one of the basic needs of mankind and ranks second only to food. It is also a symbol of status and a measure of achievement. It is usually the dream of the average person to own a home however the cost of owing one especially in urban centers has led to the development of a model where individuals and businesses purchase real estate without paying the entire value of the purchase up front. This model allows the property purchaser to purchase the property with a loan, repay the loan, plus interest, until he/she eventually owns the property free and clear.
This model is otherwise known and popularly referred to as Mortgage Finance.Let us consider the prerequisites for obtaining a mortgage in Nigeria and what a potential borrower should have in mind when obtaining mortgage facility.
Interest rates on Mortgages in Nigeria are quite high which is why it is not really a common property acquisition model, however with the establishment of the Nigeria Mortgage Refinance Company and the increasing awareness of property developers that they can use mortgage finance to sell their properties quickly it is gradually becoming popular. In Nigeria, Mortgage Finance is usually given by Mortgage Banks (Primary Mortgage Institutions), there are however property acquisition products offered by Commercial Banks and Private Developers.
GENERAL REQUIREMENTS FOR MORTGAGE
1. Evidence of Income: For an employee you need an introduction letter from your current employer to ensure that you are a permanent employee of that company. This is however not applicable where you are self-employed and in this case you might only be required to show evidence of company ownership and income.
2.Title Documents: You need to have copies of the title documents to the property you want to purchase.
3.Valuation Report: You need to produce a valuation report of the property to show that the property is appropriately priced. The valuation report would be done by an accredited estate surveyor and must be accompanied by photographs of the property.
4. Pay Slips: For an employee you would be required to submit your payslips for past six months to prove that you have a steady income and you can afford to repay the loan amount.
5. Bank Statement: You will need to produce your bank account statement for the past six to twelve months.
6. Offer letter from Owner/Agent: You need to produce an offer letter from the agent confirming your interest to purchase of the property.
7. Equity: – This is the amount you are expected to contribute in addition to the mortgage. This amount averages between 10%-20% in Western societies but in Nigeria it is as high as 30%.
8.Other Documents: Approved survey/site plans/building plans where applicable.
NATIONAL HOUSING FUND SCHEME (NHF)
National Housing fund (NHF) is a Federal Government housing scheme, to which all public servants and also employees in the organised private sector within the country are expected to contribute 2.5% of their monthly salary to Federal Mortgage Bank of Nigeria. Employees of various corporations who are active contributors to the scheme, can then access the fund at 6% interest rate per annum.
REQUIREMENTS FOR NATIONAL HOUSING FUND (NHF) LOAN
1.Be a contributor to the fund for at least six months
2.Have satisfactory evidence of regular flow of income to guarantee the loan
3.Apply on a prescribed mortgage loan application form
4.Submit photocopies of valid title documents
- Approved survey/site plans
6.Approved building plans
7.Priced bill of Quantities where applicable
8.Valuation report prepared by a firm of registered surveyors and valuer’s where applicable
9.Offer letter / Acceptance and Allocation letter
WHAT YOU NEED TO NOTE WHEN TAKING A MORTGAGE.
Interest Rates – This ranges from 15%-25% per annum in Nigeria except for NHF loans which are priced at 6% per annum
Tenor – This is the time period giving to repay a loan and is also a significant consideration in taking a mortgage.
Equity – This is your contribution to the mortgage finance and it’s usually about 30% of the property value.
Location– The location of your property is also a very important consideration should you wish to finance your purchase with a mortgage.
Title – It is important to verify Title ownership of Lands from the Lands registry.
Mortgage Finance is gaining more popularity in Nigeria as the market players introduce competitive products to lure property buyers however it’s recommended that you retain the services of a professional who can guide you in the areas of financing options, due diligence, contract documentation etc.