Want to know more about Mortgage in Nigeria? Then checkout this Fabinfos post, as we are going to give you all you need to know about Mortgage in Nigeria.
What is a Mortgage?
After a simple Google search, the definition of mortgage was said to be;
a legal agreement by which a bank, building society, etc. lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title becomes void upon the payment of the debt.
I hope that simply explains what mortgage means.
Mortgage in Nigeria – All You Need To Know
In most cases, the house you are buying serves as collateral for the loan/mortgage. In Nigeria, you are usually required to possess additional collateral property or land to meet the eligibility requirements of most banks, and both these and the mortgaged property would be taken from you if you do not meet up the monthly payments. Thus, even though this is an effective way to get up the property ladder, the stakes are very high in the event of a sudden job loss, or a change in circumstances. This is probably why most Nigerians find it preferable to buy land, and build at their own pace rather than buying land, putting it up as a collateral for a posh house, and then losing both the posh house and the land if the volatile job environment strikes.
Top 5 Mortgage Institutions in Nigeria 2018
- FBN Mortgage
- Platinum Mortgage Bank Ltd
- Abbey Mortgage Bank Plc
- Imperial Homes Mortgage Bank Limited
- Federal Mortgage Bank of Nigeria (FMBN)
Do Nigerian Banks offer Mortgage? – List of Banks that offer mortgage in Nigeria 2018
- First Bank of Nigeria
- GT Bank
- Zenith Bank
Thinking Of Getting A Mortgage In Nigeria? Top 10 Important Things You Must Know
1. Mortgage Originators – These are the players in the real estate market in Nigeria. They are your typical developers, Primary Mortgage Institutions (PMI), Banks and the National Housing Fund.
2. Agents – Lawyer and Real Estate Agents also play an important role in mitigating any risk that may arise out of the choices you make in 1 above.
3. Interest Rates – Interest rates on mortgage loans in Nigeria range from 15% t0 25% per annum excluding fees and other charges. So, you need to be informed before taking one.
4. Tenor – The time period giving to repay a loan, otherwise known as the Tenor is also a significant consideration in the repayment of a loan. A longer tenor means that you often have lower and favourable cash payouts as your principal and interest repayments are evened out over a longer period of time.
5. Equity – This is the amount you are expected to contribute from your savings in addition to the mortgage when you plan to buy a house. This amount averages between 10%-20% in Western societies but in Nigeria, Mortgage Originators will often require you contribute at least 30%.
6. Location– The location of your property is also a very important consideration should you wish to part finance it with a mortgage. Why would anyone borrow money to buy a property in a location that have little potential for economic development?
7. Cap Rates – Cap Rates are basically the return on investment a property can generate. In other words if you own a property worth N30million that can generate a going rent of N3million per annum, then the cap rate for that property is 10%.
8. Percentage of your Income – Mortgage payments should also be no more than one quarter of your take home pay or income. The reason is that when you take a mortgage that grabs 25% of your take home, it is very likely that you must have staked in a lot of equity into the property which in itself is a very good thing.
9. State – It is important to verify Title ownership of Lands from the Lands registry. It is also important to know what applicable fees are for seeking governors consent, registering land titles, land surveys, land use charge etc.
10. Taxes – Profit from a sale of property in Nigeria is chargeable for Capital Gains Tax (CGT). There is currently no CGT payable for a sale of a property which is a dwelling house (house that you live in). However, if it is a house that you own and you do not live in it, then you will pay CGT when it is sold. For those looking to obtain a mortgage, your contribution to the National Housing Fund is tax deductible from salary when computing PAYE.
There you have it on this post “What is a Mortgage, and Where Can I Get One From In Nigeria.” I hope you found this piece helpful.