The RSA-Backed mortgage initiative of the Pension Commission allows contributors to use up to 25% of their contribution as equity to purchase a home in any area of their choice.
Real Estate Investment decisions in Nigeria largely depend on a variety of factors that may influence the standard of living and current financial pocket. The main reason that guides the decision to purchase a property involves having a permanent place to call “home”.
In seeking opportunities to help contributors get more value from their contribution ahead of their retirement, the Pension commission partnered with financial institutions such as Stanbic IBTC Bank to make funds available to verified contributors to buy homes while using part of their RSA balance as equity contribution.
Before PenCom states that the maximum amount to be withdrawn is 25% of the total mandatory RSA balance as of the date of application, it is important to note that this is irrespective of the value of equity contribution required by the mortgage lender.
In a situation where 25% of a contributor’s RSA balance is not sufficient for payment as equity contribution, the RSA holders may utilize the contingency portion of their voluntary contributions if it’s available.
If such a person had accessed part of the funds before either leaving paid employment, suddenly losing their job, or before retirement age, he will still get a lump sum at retirement. Such an individual can still get part of the funds for a mortgage after meeting specific conditions stated in the guidelines, but he must sign a consent form to access it.
This consent form states that you are indemnifying the PFA and that you understand the terms clearly. So that at the point of the final retirement, if such benefits are lower compared to one’s colleagues, such a person would not complain.
Leveraging mortgage pension scheme to own a house:
Application procedure
According to the guidelines, the applicant must obtain a property offer letter from the property owner or approved agent and approach a mortgage lender. He must fill out an application for a mortgage, which must be provided by the mortgage lender, and should attach the property offer letter. Also, the mortgage lender will review the application form and verify the genuineness of the property offer and will do due diligence to ensure that the property has a valuation report. Upon confirmation of the property offer letter, the applicant will approach his Pension Fund Administrator and request his RSA statement to access the 25% of his RSA balance for payment of equity contribution.
Also, in a joint application, each party must apply to their respective PFAs with copies of the verified property offer letter. The PFA must issue a duly endorsed RSA statement to the applicant, which the applicant must forward to his mortgage lender. Similarly, the PFA must update records on applications for equity contributions for residential mortgages upon issuing the RSA statement to the RSA holder.
Approved mortgage lender
The Central Bank of Nigeria’s list of primary mortgage lenders showed that 34 operators had operating licenses as of the end of June 2021.
However, PenCom, under its mortgage guidelines, had stated that the names of mortgage lenders that met the eligibility criteria of its guidelines would be published on the commission’s website on a bi-annual basis or when any new license was issued by the CBN.
PenCom stated that it would liaise with the CBN on an annual basis to determine the mortgage lenders meeting the stipulated minimum requirements of the guidelines and other conditions as might be specified by the CBN regularly.
It stated that the mortgage lender must be licensed by the CBN to provide residential mortgages and must have met the minimum capital requirement as prescribed by the CBN from time to time.
The mortgage lender must have a valid pension clearance certificate issued by PenCom in line with the PRA, 2014, which mandates it to have pension and group life insurance for its workers.
Exemptions
Those exempted from the initiative, according to the guidelines are RSA holders that have less than three years to retire; exempted persons under the PRA 2014, and RSA holders who do not have both employer and employee mandatory contributions for a cumulative minimum period of 60 months.
The equity contribution is also not for refinancing an existing mortgage, outright purchase of property, and purchase of land, and the property must be for residential purposes only.
Other criteria
The RSA holder must have an offer letter for the property duly signed by the property owner and verified by the mortgage lender. The RSA of the applicant must have both employer and employee’s mandatory contributions for a cumulative minimum period of 60 months before the application for the RSA holder to access his RSA balance for equity contribution for a residential mortgage.
Also, married couples who are RSA holders can be eligible to make a joint application, subject to individually satisfying the eligibility requirements.
