Requirements for Getting a Mortgage Loan in Nigeria

In Nigeria, owning a home is often seen as one of the most important life achievements. For many, this dream is realized through the process of securing a mortgage loan. However, the mortgage system in Nigeria can be difficult especially for first-time applicants. 

The requirements, processes, and institutions involved may not always be clear, which is why it’s essential to understand the criteria that need to be met before applying for a mortgage. This article will outline the key requirements for getting a mortgage loan in Nigeria, providing a step-by-step guide to help you through the process with ease.

1. You Need to Understand how the Nigerian Mortgage System works.

A mortgage is a loan specifically designed to help individuals purchase property. The property itself serves as collateral for the loan, meaning that if the borrower defaults, the lender has the right to seize the property.

In Nigeria, mortgage loans are typically offered by specialized institutions such as the Federal Mortgage Bank of Nigeria (FMBN), Primary Mortgage Banks (PMBs), and some commercial banks. These institutions follow specific guidelines and regulations, often governed by the Central Bank of Nigeria (CBN) and the Nigerian Mortgage Refinance Company (NMRC).

The Nigerian mortgage market is still developing, and as a result, there are challenges such as high-interest rates, limited access to long-term funds, and a lack of awareness among potential homeowners. Despite these challenges, securing a mortgage loan is possible if you meet the necessary requirements.

2. Basic Requirements for a Mortgage Loan in Nigeria.

The requirements for obtaining a mortgage loan in Nigeria vary depending on the lender. However, some standard criteria apply across most mortgage institutions:

2.1. Income and Employment Stability.

One of the most critical factors in determining eligibility for a mortgage loan is income. Lenders want to ensure that borrowers have a stable source of income that can support monthly repayments over the long term, often stretching 10-30 years. As a result, most lenders will require proof of steady employment or a stable business income. Generally, salaried workers are preferred because of the predictability of their income, but self-employed individuals and entrepreneurs can also qualify if they can demonstrate consistent earnings over time.

You will need to provide documentation such as:

• Payslips (usually for the last six months)
• Tax clearance certificates
• Bank statements (often for the last six months)
• Employment letter confirming your job status

Self-employed individuals will need to provide additional documents such as:

• Business financial statements (for at least three years)
• Evidence of business registration
• Audited accounts

2.2. Creditworthiness and Credit History.

In Nigeria, your creditworthiness plays a significant role in whether you can secure a mortgage. Most mortgage lenders will assess your credit history to determine how responsible you are with debt. A good credit history shows that you have managed past loans and credit facilities responsibly, while a poor credit history or history of loan default can be a red flag for lenders.

In Nigeria, credit bureaus such as the Credit Registry and CRC Credit Bureau help financial institutions assess an applicant’s credit history. Ensure that you have a good credit score by paying off any outstanding debts and maintaining a clean credit record.

If you do not have a credit history, some lenders may be willing to assess your application based on other factors, but this can make the process more complicated and increase your interest rate.

2.3. Deposit or Equity Contribution.

Mortgage loans in Nigeria require the borrower to make a down payment or equity contribution. This is typically between 10% and 30% of the total value of the property you intend to purchase. The exact percentage varies depending on the lender and the specific loan product you are applying for.

For instance, the Federal Mortgage Bank of Nigeria (FMBN) under the National Housing Fund (NHF) Scheme requires a down payment of about 10% for a property that falls within their affordable housing scheme. On the other hand, commercial banks and PMBs may ask for higher equity contributions, especially if the property is more expensive or considered a higher risk.

2.4. Age of the Applicant.

Age is another important consideration when applying for a mortgage loan. In most cases, mortgage lenders in Nigeria require applicants to be between 21 and 60 years old. This is because lenders want to ensure that the borrower can repay the loan before retirement. The maximum mortgage term typically aligns with the borrower’s expected working years. For instance, if you are 45 years old, you may only be eligible for a 15-year mortgage term, as most lenders will not offer mortgages that extend past the age of 60.

However, some banks and mortgage institutions may extend the upper age limit to 65 or 70, provided that the borrower has a solid repayment plan in place.

2.5. Property Valuation and Approval.

Lenders require a thorough valuation of the property you intend to purchase. This is to ensure that the property is worth the amount you are borrowing. The valuation process assesses the condition, location, and market value of the property. This helps lenders mitigate the risk of lending more money than the property is worth.

In some cases, lenders may require the property to meet specific criteria, such as being in a developed area with necessary infrastructure. Properties located in high-risk areas or those without proper documentation may not be accepted as collateral for a mortgage loan.

2.6. Legal Documentation.

Having the right legal documentation is essential for securing a mortgage in Nigeria. Lenders will require you to provide documents proving ownership of the property and your legal right to transfer it as collateral. These documents typically include:

• Certificate of Occupancy (C of O)
• Deed of Assignment
• Survey Plan
• Building Plan Approval

In some cases, the lender may assist in verifying these documents to ensure that the property does not have any legal encumbrances or disputes.

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3. The National Housing Fund (NHF) Scheme.

One of the most popular ways to access mortgage loans in Nigeria is through the National Housing Fund (NHF) Scheme, managed by the Federal Mortgage Bank of Nigeria (FMBN). This scheme is aimed at providing affordable housing for Nigerians, especially low and middle-income earners.

To qualify for an NHF loan, you must:

• Be a Nigerian citizen aged 18 and above
• Contribute 2.5% of your monthly income to the NHF scheme for at least six months
• Apply through a registered Primary Mortgage Bank (PMB)
• Have satisfactory evidence of regular income

The NHF scheme offers lower interest rates than most commercial mortgage loans, making it a more attractive option for many Nigerians. The maximum loan amount is N15 million, with a repayment period of up to 30 years, depending on the borrower’s age and income level.

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4. Interest Rates and Loan Terms.

Interest rates for mortgage loans in Nigeria vary depending on the lender and the type of loan. Commercial banks generally offer higher interest rates, often ranging from 15% to 25% per annum, depending on market conditions and the risk profile of the borrower.

However, the NHF scheme offers significantly lower rates, around 6% per annum. This makes it a preferred option for many first-time homebuyers.

Loan terms also vary, but most mortgage loans in Nigeria are structured over a 10-30 year period. The length of the loan term depends on factors such as the borrower’s age, income, and the type of mortgage product selected.

5. Preparing for the Mortgage Application Process

Securing a mortgage loan in Nigeria requires careful planning and preparation. Meeting the basic requirements such as stable income, a good credit history, and an adequate deposit are critical to increasing your chances of success. Moreso, understanding the details of the mortgage system, including the role of the National Housing Fund, can help you make right decisions about which mortgage product is best for you.

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