If you are like most people, you will agree that owning a house or a home in Nigeria today is one of the most accomplished undertakings.
However, the economic situation in the country has made it very expensive and frustrating to do with the cost of land is ever-rising; the price of construction materials off the roof, and so much more.
Now, imagine a way that would make owning your dream house a reality regardless of your net worth. That is where a mortgage comes in!
This is a guide on:
- What mortgage means
- What you need to get a mortgage
- Where to get a cheap mortgage
- Top mortgages providers in Nigeria
What is a mortgage?
A mortgage is a loan. It is a loan offered by banks and other financial institutions to homebuyers. The property is used as collateral for the loan. To get started, most banks will require a down payment of 20% of the value of the property.
An advantage of taking a mortgage is that you own a little piece of the property every time you pay off the mortgage. Conversantly, this is not the case with paying rent.
Taking a mortgage on a property strips the ownership into two: equity, which is what you own, and debt, which is what the bank owns. Therefore, when making a mortgage repayment, you buy more equity and end up owning the property by the end of the amortization period.
Another advantage of taking a mortgage is that you can trip the value of the property once you have bought it. Let say, for instance, you take a mortgage of N4,000,000 and buy a property.
Say, you find a person who is interested in the property and is willing to pay you N7,000,000. If you chose to sell the property at that amount, you will have made a cool N3,000,000. You only require paying the bank what you owe them, and not a cent on the profit you made.
Types of mortgages in Nigeria
There are basically two types of mortgages in Nigeria, namely legal mortgage and equitable mortgage. The mode of creating a legal mortgage in Nigeria is determined by the law applicable in the State where the property is situated.
A legal mortgage is the most secure and comprehensive form of security interest as it transfers the mortgagor’s legal title in an asset to the mortgagee.
On the other hand, an equitable mortgage involves the transfer of the mortgagor’s beneficial interest in an asset to the mortgagee by way of security for the performance of obligations.
An equitable mortgage arises where the formalities to create a legal mortgage have not been completed or where the asset being mortgaged is only an equitable interest.
As only the beneficial interest in an asset is transferred, an equitable (rather than a legal) security interest is created. Because a legal mortgage transfers the outright ownership in the land, it is easier for a mortgagee to enforce a legal mortgage.
Legal Mortgage
A legal mortgage is the most secure and comprehensive form of security interest as it transfers legal title to the Mortgagee and prevents the mortgagor from dealing with the mortgaged assets while it is subject to the mortgage.
The involvement of legal interest in creation of legal mortgage necessitates the mandatory requirement for the document of creation to be under seal.
Equitable mortgage
An equitable mortgage involves the transfer of the borrower’s beneficial interest in an asset to the lender by way of security for the performance of particular obligations, on the express or implied condition that such beneficial interest will be retransferred when the secured obligations are discharged.
As only the beneficial interest in an asset is transferred, an equitable (rather than a legal) security interest is created
Types of loans you might be offered
To entice a huge number of borrowers, financial institutions try as much as possible to tailor the mortgage for different clients.
Most banks and other financial institutions are likely to offer the following loans:
- Owner-occupied residential mortgage. This is for those who wish to live in the property they purchase with the mortgage.
- Investment residential mortgage. This is for those that purchase the property as an investment and not as their primary residence.
- Construction loan for those looking to build from the ground The amount is often sent to the contractor are the professionals overseeing the project.
- To up loans also called Equity loan. This is an easier way of getting extra funds using the equity you have accrued. The loan can be used for other reasons.
What you need to get a mortgage
Therefore, now that you know all about mortgages, here is what you will need to get started with your dream homes.
For most banks and other financial institutions, you will need the following documents to get a mortgage. Note, however, that the exact documents required may vary from one institution to the other. Check with the lender you prefer just to be sure.
Here is a mortgage checklist you will need.
- A signed mortgage application form
- Original copies of your identification documents, ID or Passport
- An introduction letter from your employer (for those employed)
- 3 months’ payslip
- Certified bank statement for at least 6 months
- Letter of offer or a sales agreement (when looking to purchase)
Full list of Primary Mortgage Providers in Nigeria
The Central Bank of Nigeria has licensed 34 primary mortgage lenders in Nigeria. They include:
- Akwa Savings and Loans Limited
- Aso Savings and Loans PLC
- Coop Savings and Loans Limited
- Delta Building Society Limited
- First Trust Mortgage Bank
- FHA Homes Savings and Loans Limited Mortgage Lenders
- First Generation Homes Limited
- Gateway Savings and Loans Limited
- Infinity Trust Mortgage Bank Limited Mortgage Lenders
- Lagos Building and Investment Company Limited
- MayFresh Savings and Loans Limited
- Mutual Alliance Savings and Loans Limited
- New Prudential Building Society Limited
- Nigeria Police Mortgage Bank
- Omoluabi Savings and Loans Mortgage Lenders
