Mortgage Finance

Saving up enough money to own a house can be a mission impossible in Nigeria, especially as there is high inflation rate. Before you can put enough money aside, the property prices has gone up. Also your expenses keep rising and unless your income increases saving becomes virtually impossible.  In this regard mortgage finance is supposed to be a way out, but is mortgage really meant for everyone?

So what are the terms and conditions under which a mortgage loan can be granted? Can anybody just work into a financial institution to access a mortgage loan?

First and foremost, a mortgage loan applicant is expected to have a steady and verifiable source of income. He/she is also not expected to service the mortgage loan with more than 36% of his/her monthly income (this is internationally accepted).

Even after meeting these conditions, assuming that you are a salary earner, so how much should you be earning to qualify for a mortgage loan that will enable you acquire your own house? A mortgage loan applicant who is earning N100,000 per month, which comes to N1.2million per annum, can only service a mortgage with N36,000 per month. What this implies is that the applicant can only apply for a mortgage loan of N2million with an 18% interest rate and a 30year tenor, assuming that he is not above 30years old. This estimation can be done using “Dept - to  Income Ration”, that is net yearly income multiplied by 36%, then divided by 12months. If earning as much as N100,000 monthly can only guaranty you a N2million mortgage loan, so where then is the hope of majority of Nigerians who earn far below this amount monthly acquiring their own house? This must explain why the federal government came up with the National Housing Fund (NHF) which can be accessed through the Federal Mortgage Bank of Nigeria, to cater for the majority of Nigerians who cannot afford to access mortgage loans through other financial institutions.

But the National Housing Fund (NHF) also has its own criteria. The maximum loan amount is N5million, with a 30year tenor and 6% interest rate. But can N4Million-N5million get you that your dream home in your choice location? You may have to consider reducing your taste and set standard of your dream home,afterall; “A man living in is own house at Badagry is still better of than the man living in a rented apartment at Lekki”, This is because he is free from incessant harassment and menace of shylock landlords. This is where the government has to step-in, to provide affordable housing for the vast majority who has little or no chance of affording the conventional mortgage loan. This can be achieved through the provision of land for housing development purposes to developers, all necessary infrastructures and also subsidize the final cost of the finished houses. 

With land and all other necessary infrastructures provided, government can provide a mini flat for N1million, which can then be acquired through the NHF. Being that the NHF loan has a 30year tenor, an applicant earning a monthly salary of N25,000 can conveniently access this mortgage facility and own a house in his life time. This will go a long way in empowering civil servants and reducing if not eliminate a lot of social vices prevalent in our society today.

In conclusion, it is safe to say that mortgage finance as it is structured today, is not designed for everybody. Yes, NHF is a welcomed alternative, but government still needs to do more to make housing more affordable to the vast majority. 

NFH loan criteria

1. Borrower must be a contributor to the Fund and must have contributed for a period of not less than six months. 
2. Brrower must have evidence of regular flow of income. 
3 Not more than one-third (1/3) of the income of the borrower shall be considered for a loan repayment -- affordability level. 
4 Maximum loan to an individual applicant shall not be more than N5,000,000.00 (five million naira only). 
5.The loan can be used to develop a land or to buy a property 
6. A borrower must open a mortgage account with a primary mortgage bank which will process their loan application once the necessary requirements are met 
7. 10 percent of the required loan amount must be contributed.