Owning a home in Nigeria is a significant milestone, a symbol of stability and accomplishment. But let’s face it, saving up for a house outright can be a daunting task. That’s where mortgages come in – a financial tool that bridges the gap between your dream and reality.

This article delves into the world of mortgage banks in Nigeria, guiding you through the ins and outs of mortgage lending and how it can help you achieve your homeownership goals.

Table of Contents

• Definition of Mortgage
• History of Mortgage in Nigeria
• Mortgage Banks
• Federal Mortgage Bank of Nigeria (FMBN)
• National Housing Fund (NHF)
• Diaspora NHF Scheme
• Services Offered by Mortgage Banks in Nigeria
• Types of Mortgages in Nigeria
• Factors to Consider Before Applying for a Mortgage in Nigeria

Definition of Mortgage

A mortgage, in simple terms, is a loan specifically designed to help you purchase a property. The bank or financial institution lends you a significant amount of money, which you then repay with interest over a set period. The property itself acts as collateral, meaning that if you fail to make your repayments, the bank may repossess it.

History of Mortgage in Nigeria

Mortgage lending in Nigeria has a relatively young history compared to some developed countries. The first formal mortgage institution, the Nigerian Building Society (NBS), was established in 1956. However, the system remained largely underdeveloped until the 1970s.

The establishment of the Federal Mortgage Bank of Nigeria (FMBN) in 1977 marked a significant turning point. The FMBN, as we’ll discuss later, plays a crucial role in promoting and facilitating mortgage ownership in Nigeria.

Since then, the mortgage industry has seen steady growth, with an increasing number of Mortgage Banks offering competitive products and services.

Mortgage Banks

Mortgage Banks, also known as Primary Mortgage Banks (PMBs), are specialized financial institutions licensed by the Central Bank of Nigeria (CBN) to offer mortgage loans. Think of them as your partners in your homeownership journey. They understand the intricacies of mortgage lending and can guide you through the process, from pre-qualification to securing the loan and eventual ownership of your dream home.

Federal Mortgage Bank of Nigeria (FMBN)

The Federal Mortgage Bank of Nigeria (FMBN) is the apex mortgage institution in Nigeria. Unlike PMBs which directly offer mortgage loans, the FMBN plays a supervisory and regulatory role. It sets guidelines for mortgage practices, promotes mortgage development, and manages the National Housing Fund (NHF).

• National Housing Fund (NHF): The National Housing Fund (NHF) is a contributory scheme established by the National Housing Fund Act of 1992. The NHF requires mandatory contributions of 2.5% of the monthly basic salary for both employers and employees. These contributions are then pooled and used to provide affordable mortgages.
• Diaspora NHF Scheme: The Diaspora NHF Scheme allows Diasporians to contribute to the NHF and benefit from the potential advantages, including access to affordable mortgages when they return home.
• Mortgage Guarantee Scheme: The FMBN provides guarantees to mortgage lenders, reducing their risk and encouraging them to offer more competitive mortgage products.
• Estate Development: The FMBN partners with private developers to facilitate the construction of affordable housing units.

Services Offered by Mortgage Banks in Nigeria

PMBs offer a range of services to cater to your homeownership needs. Here are some of the key services you can expect:

• Mortgage origination: PMBs assess your financial situation and eligibility for a mortgage.
• Loan processing: They handle the paperwork and liaise with relevant authorities to secure your loan.
• Disbursement of funds: Once the loan is approved, the PMI disburses the funds directly to the seller of the property.
• Loan servicing: They manage your loan repayments and ensure a smooth process.
• Advisory services: Many PMBs offer guidance on property selection, budgeting for homeownership, and other related matters.
• Property Financing: PMBs finance properties by funding developers who build properties that are offered to customers via mortgages. For example, Jubilee-Life Mortgage Bank Plc has financed various properties including the Ogba chopping complex, Overflow estate, and Maple Court.

Types of Mortgages in Nigeria

PMBs offer different mortgage products to suit your specific needs and financial situation. Here’s a glimpse into some common types:

• NHF Mortgage: This is an affordable mortgage with attractive interest rates, specifically designed for contributors to the National Housing Fund.
• Property Mortgages: A property mortgage loan in Nigeria is a type of loan offered by banks and other lenders to help you finance the purchase of real estate, which can include houses, or even commercial properties.
• Land Purchase Mortgages: Financing the acquisition of land for future development can be achieved with this type of mortgage.
• Joint Mortgages: Two or more people can combine their income and creditworthiness to qualify for a mortgage.

Factors to Consider Before Applying for a Mortgage in Nigeria

To ensure a smoother Homeownership journey through Mortgage, Here are some crucial factors to consider.

• Credit score: Your credit score is a number that Mortgage lenders use to determine the probability that you will repay your loan on time. The higher the credit score the higher the probability.
• Down payment (Equity Contribution): this amount of equity you contribute, typically a certain percentage of the property’s purchase price. A higher down payment reduces the loan amount you need to borrow.
• Fees and charges: There are fees associated with finalizing a mortgage loan. These may include legal fees, valuation reports, and insurance premiums.
• Interest Rates: Interest rates significantly impact your monthly payments and total loan cost. Choose the option that best fits your budget for a smoother and more affordable homeownership journey.
• Loan Term: The loan term determines the length of your repayment period. Choose a loan term that fits your budget and long-term financial goals.
• Affordability: Don’t just focus on the monthly mortgage payment, ensure your overall housing costs fit comfortably within your budget without compromising your lifestyle.
• Location, Location, Location: Consider the long-term value and stability of the neighbourhood you’re interested in. Research projected property values, amenities, and proximity to essential services like schools and healthcare.

Source: Federal Mortgage Bank of Nigeria