Mortgage: How does it work?

What is a mortgage?

In simple terms, a mortgage is a loan specifically for buying property. In Nigeria, banks and mortgage institutions offer various types of mortgages. Fixed-rate mortgages have stable interest rates throughout the loan period, while adjustable-rate mortgages can change over time. It's essential to weigh the pros and cons of each type before making a decision.

How does a mortgage work?

1. A mortgage lets you borrow money to buy a home, with a contract to repay with interest over several years. It can take up to ten years or more.
2. You don't fully own the home until the mortgage is paid off.
3. Interest rates depend on market conditions and the lender's perceived risk.
4. The lender can't lend more than the home's appraised value.
5. Mortgage loans are secured, with the property as collateral.
6. You will repay the loan through fixed monthly installments.

Steps to Secure a Mortgage:

1. Gather necessary documents like proof of income, identification, and property details.
2. Meet eligibility criteria set by lenders, which may include credit score requirements.
3. It is worthy to note that overcoming challenges during the application process, such as paperwork or credit issues, requires patience and persistence.

Some creative financing options in Nigeria:

1. National Housing Fund (NHF) Loan: A federal government initiative providing affordable housing loans to Nigerians.

2. Federal Mortgage Bank of Nigeria (FMBN) Loan: Offers long-term loans at reduced interest rates.

3. Commercial banks' mortgage schemes: Many banks offer competitive mortgage rates and flexible repayment terms.

4. Private financing initiatives: Companies like Propertymart, the Lagos State Government's Rent-to-Own scheme, and others offer innovative financing options.

5. Cooperative society financing: Join a cooperative society to access group financing for housing.

Keep in mind that these options come with varying terms, conditions, and eligibility requirements. It's essential to research and consult with financial experts to determine the best solution for your specific situation.

Best Regards,

Joan Obi-Okuhon,

Real Estate Advisor.