For many people, owning a home is a lifelong dream. Mortgage loans offer a path to homeownership by providing individuals and families with the funds needed to purchase a house, with the promise of repayment over time.

Nigeria’s mortgage market offers different types of mortgage loans, each tailored to different needs and financial situations. We will explore the various types of mortgage loans in Nigeria and provide essential details to help you make an informed decision.

Types of Mortgage Loans

1. Mortgage Bank Loan
2. Commercial Bank Loan
3. National Housing Fund Loan
4. Diaspora NHF Mortgage Loan
5. Estate Development Loan
6. Mortgage Refinance Loans
7. Non-interest (Islamic) Mortgage Loans
8. Home Equity Loans
9. Buy-to-Let Mortgage Loans
10. Commercial Property Mortgage

1. Conventional Mortgage Loans

Conventional mortgage loans are the most widely known and used types of mortgage loans in Nigeria. They can be obtained from Mortgage Banks and Commercial Banks.

• Mortgage Bank Loan

Mortgage banks in Nigeria are specialized financial institutions dedicated to providing mortgage loans to prospective homeowners. These loans are generally suitable for individuals who meet the eligibility criteria and can demonstrate a reliable source of income. Mortgage banks offer various types of mortgage loans tailored to specific needs, including home purchase, construction, or refinancing.

Mortgage bank loans come with competitive interest rates and repayment terms, making homeownership more accessible for many Nigerians. However, applicants need to have a good credit history and meet income requirements to secure a mortgage bank loan.

These loans typically require a down payment, and the property being financed serves as collateral. For example, at Jubilee-Life Mortgage Bank plc we offer as low as a 30% down payment.

• Commercial Bank Loan

Commercial banks also offer conventional mortgage loans to their customers in Nigeria. These loans provide an alternative for individuals seeking mortgage financing from their primary banking institution. Commercial bank loans are suitable for those who have established relationships with these banks and are looking for competitive interest rates and repayment terms.

Commercial banks may have more stringent eligibility criteria, and their loan approval process can be quite rigorous. Borrowers are required to meet income and credit score requirements and make a down payment. Like mortgage bank loans, the property being financed serves as collateral, and the loan’s interest rate is typically fixed or adjustable.

2. Federal Mortgage Bank of Nigeria Loans

The Federal Mortgage Bank of Nigeria (FMBN) plays a vital role in promoting homeownership across the country. FMBN offers several types of mortgage loans to cater to the needs of various individuals and demographics.

• National Housing Fund Loan

The National Housing Fund (NHF) is a significant initiative in Nigeria designed to make homeownership more accessible to Nigerians. The NHF loan is available to contributors of the NHF scheme, which is mandatory for employees earning a minimum wage or above. The NHF loan offers favorable terms, including lower interest rates and longer repayment periods, making it an attractive option for many.

To access the NHF loan, eligible individuals must be registered contributors and have contributed consistently to the NHF for a specified period. The loan can be used for home purchase, construction, or renovation. The property serves as collateral, and borrowers enjoy competitive interest rates.

• Diaspora NHF Mortgage Loan

The Diaspora NHF Mortgage Loan is a specialized offering from the FMBN targeted at Nigerians living in the diaspora. It allows Nigerians abroad to access mortgage financing through the NHF scheme, promoting homeownership among the Nigerian diaspora community.

Eligible individuals must be registered contributors to the NHF scheme and meet specific requirements. The Diaspora NHF Mortgage Loan offers competitive interest rates and extended repayment periods, making it an appealing option for Nigerians abroad who want to invest in Nigerian real estate.

• Estate Development Loan

The FMBN also extends its support to real estate developers through the Estate Development Loan. This loan is designed to provide financing to developers involved in the construction of residential properties and estates. The loan aims to address the housing deficit in Nigeria by promoting real estate development.

Developers must meet certain criteria to qualify for the Estate Development Loan, including the submission of project proposals and meeting FMBN’s guidelines. The loan can be used for land acquisition, infrastructure development, and construction, contributing to the expansion of affordable housing options in Nigeria.  (can we use this classification for RPDC)

3. Mortgage Refinance Loans

Mortgage refinance loans are a financial tool that allows homeowners to replace their existing mortgage with a new one, typically with better terms. In Nigeria, mortgage refinance loans are available from various financial institutions and can be beneficial for those seeking to lower their interest rates or reduce their monthly mortgage payments.

Refinancing a mortgage in Nigeria involves paying off the existing mortgage with the proceeds from the new loan. This can result in reduced monthly payments or a shorter loan term. It’s a useful option for homeowners who have seen a significant improvement in their credit profile or wish to take advantage of lower interest rates in the market.

4. Non-Interest (Islamic) Mortgage Loans

Non-interest mortgage loans, also known as Islamic mortgage loans, adhere to Sharia principles and are designed for individuals who want to finance their homes without engaging in conventional interest-based lending. In Nigeria, Islamic mortgage loans are gaining popularity among individuals seeking to adhere to Islamic financial principles.

Islamic mortgage loans are structured based on profit-sharing arrangements or lease agreements rather than traditional interest payments. These loans comply with Islamic finance principles, making them accessible to a broader segment of the population while accommodating religious beliefs.

Islamic mortgage loans in Nigeria are offered by specific financial institutions that adhere to Islamic finance standards. These loans are suitable for individuals looking for mortgage options that align with their religious convictions.

5. Home Equity Loans

Home equity loans allow homeowners to leverage the equity they’ve built up in their homes to secure financing for various purposes. In Nigeria, home equity loans are available from several financial institutions and can be a valuable resource for individuals seeking to access funds for home improvements, education, or other financial needs.

Home equity loans work by using the home as collateral. The amount of the loan is typically determined by the difference between the property’s current market value and the outstanding mortgage balance. Borrowers can access a lump sum or a line of credit and repay the loan over time with fixed or variable interest rates.

6. Buy-to-Let Mortgage Loans

Buy-to-let mortgage loans are designed for individuals interested in purchasing residential properties with the intention of renting them out. These loans allow investors to finance their real estate acquisitions and generate rental income.

Buy-to-let mortgage loans in Nigeria are offered by various financial institutions, including mortgage banks and commercial banks. Investors can choose from different loan options, each tailored to specific needs. These loans may require larger down payments and have different eligibility criteria compared to conventional home purchase mortgages.

Investors can use buy-to-let mortgage loans to build a real estate portfolio, diversify their investment portfolio, and generate rental income. It’s essential to carefully evaluate the rental market and conduct thorough research before embarking on a buy-to-let investment strategy.

7. Commercial Property Mortgage

Commercial property mortgage loans are aimed at individuals or businesses looking to purchase or refinance non-residential properties for commercial purposes. These loans cater to the diverse needs of commercial real estate investors, including those seeking to acquire office buildings, retail spaces, industrial facilities, or other commercial properties.

Commercial property mortgage loans in Nigeria come with varying terms and conditions, depending on the financial institution providing the loan. They typically require a detailed assessment of the property’s potential for generating income, as the property itself often serves as collateral. Interest rates can be fixed or variable, and the repayment period varies based on the specific loan agreement.

Are you Eligible for a Mortgage Loan?

Before applying for a mortgage loan in Nigeria, it’s essential to understand the eligibility criteria that financial institutions typically require.

While these criteria can vary from lender to lender, here are some common factors:

• Stable source of income: Lenders want to ensure that borrowers have a consistent source of income to meet their mortgage obligations.
• Good credit history: A positive credit history demonstrates your ability to manage debt responsibly.
• Down payment: Most lenders require a down payment, typically a percentage of the property’s purchase price.
• Age and legal status: Borrowers must meet the legal age requirements and be Nigerian citizens or permanent residents.

Whether you are a first-time homebuyer, an investor, or a real estate developer, there is a mortgage loan type that suits your requirements.

It’s essential to conduct thorough research and carefully assess your financial situation before selecting the right mortgage loan for your homeownership or investment goals.

With the various mortgage products available in Nigeria, achieving your dream of property ownership is well within reach.

Jubilee-life Mortgage Bank has helped over 1000 Nigerians achieve their dream of property ownership.  Let’s help you too. Begin your journey to property ownership here.