When people are looking to purchase a building or building a house this more times than not requires having a huge amount of cash which may take time to save up and gather. This is where a mortgage comes in.
According to investopedia “The term mortgage refers to a loan used to purchase or maintain a home, land, or other types of real estate. The borrower agrees to pay the lender over time, typically in a series of regular payments that are divided into principal and interest. The property serves as collateral to secure the loan. A borrower must apply for a mortgage through their preferred lender and ensure they meet several requirements, including minimum credit scores and down payments. Mortgage applications go through a rigorous underwriting process before they reach the closing phase. Mortgage types vary based on the needs of the borrower, such as conventional and fixed-rate loans.”
In 1992 in Nigeria, The National Housing Fund in Nigeria originated, it is often referred to as “The Fund”. The main aim of the fund are as follows, first it’s major aim is to facilitate the mobilization for the Fund to provide houses for Nigerians at affordable prices. Secondly, ensure a constant supply of loans to Nigerians with a purpose of building, purchasing and improving residential houses. The third objective is to provide incentives for the capital market to invest more in property. The fourth, is to encourage the development of specific programmes that would ensure effective financing of housing development, in particular low cost housing for low income workers. The fifth reason the Fund came into existence is to provide top level policy control over the allocation of resources and funds between the housing sector and other sectors of the Nigerian economy and the last but not least important reason is to provide long-term loans to mortgage institutions for on-lending to contributors to the Fund.
The fund will be funded from a variety of resources, i.e contributions by Nigerians, both in public and private sector, individuals earning over an income of N3,000 and above per annum in both the public and the private sectors of the economy shall contribute 2.5% of their basic monthly salary to the Fund. Contributions from both commercial and merchant banks, these banks are required to l invest in the Fund 10% of its loans and advances at an interest rate of 1% above the interest rate payable on current accounts by banks. Investment in the Fund from insurance companies registered under the Insurance Act, insurance companies shall invest a minimum of 20% of its non-life funds and 40% of its life funds in real property development of which not less than 50% shall be paid into the Fund through the Federal Mortgage Bank of Nigeria (in this Act referred to as “the bank”) at an interest rate not exceeding 4%. the government also contributes to the fund. The government is required to make adequate financial contributions to the Fund with the mission of granting long-term loans and advances for housing development in Nigeria.
This fund has multiple benefits for those who require it such as; housing loan of up to 90% of the cost of the house, the interest on loans remains fixed throughout the life of the mortgage at 6% pa, the Fund also offers a relatively long period of repayment of up to 30 years, up to 15 million can be borrowed, refunds with 2% interest on retirement, loan payment is about the same as typical monthly rent, as well as other benefits.
However, it is worth noting that there are other commercial housing loans available in Nigeria, and they can be derived from private banks, such as FBN Mortgages. Platinum Mortgage Bank Ltd, Abbey Mortgage Bank Plc, Trustbond Mortgage Bank, etc.
