Mortgages represent loans used to maintain or buy land, home, or other sorts of real estate. For mortgages, the borrower signs an agreement to fully repay the lender under a specific period, usually in regular installments divided into interest and principal. The property is utilized as security for the lender’s loan.
Borrowers are expected to apply for mortgages with their lender and meet certain criteria, including down payments and credit scores. Before they get to the closing stage, mortgage applications are processed through an underwriting process.
Fixed-rate and conventional loans represent the two major mortgages classes that differ depending on the demands of borrowers. Before we go into details, let’s have an understanding of what mortgage institutions are.
A mortgage institution is a financial institution that provides loans to persons who want to buy real estate. People may not be able to purchase homes with their monthly salaries.
It may take a long time to gather up enough money to buy or construct a home. Mortgage banks enter the picture by lending this real estate investment capital and collecting payments in installments. Depending on the type of mortgage bank, these loans may or may not be recovered with interest.
Why Do Nigerians Require Mortgage Loans?
The cost of a home is much higher than the amount of cash saved by most families. Given that, mortgages allow families and individuals to acquire homes with only a down payment, such as 20% of the price of purchase, and a loan to cover the balance. If the borrower defaults, the loan is secured by the property value.
How Do Mortgages Operate?
Mortgages allow individuals and corporations to buy real estate without looking to pay the whole purchase price upfront. Borrowers are expected to pay back the loan alongside interest over an agreed period of time until they get the property outright.
Charges against claims on property are other mortgages terms used in a business environment. If a borrower happens to default on a loan, the lender has the full legal right to foreclose the property.
A residential homeowner, for instance, promises a lender, who then secures a claim on the property. If the homeowner defaults on his financial duties, this fully protects the interest of the lender on the property.
In events of foreclosure, lenders can evict the occupants, sell the property, as well as, make use of the proceeds to settle the mortgage debt.
Explaining what the Mortgage Application Process Entails
Interested borrowers begin the mortgage application process by submitting an application to different mortgage lenders personally or through a mortgage broker. When a lender is found, the lender will be expected to demand proof of the borrower’s ability to service the loan.
Bank and investment statements, proof of current employment, and recent tax returns are all examples of this. In most scenarios, lenders will also do a credit check.
When the application is approved, the lender will make the borrower a good offer for a mortgage loan up to a given cash amount at a rate of interest.
Pre-approval represents a method that allows homeowners to apply effectively for mortgages after they have made decisions on a property to buy or while they are in search of one.
When a seller and buyer have reached an agreement on the terms of their transaction, they or their agents are expected to meet for closing. This is when the borrower pays the lender a down payment.
The seller moves on to lift the ban on the property foreclosure and receive the agreed cash amount, and the buyer gets to sign any remaining mortgage agreements.
Examining The Mortgage Rate in Nigeria
Housing scarcity is one of the many issues that Nigeria faces. The Bureau of Public Service Reform (BPSR) issued a warning in 2017 that Nigeria was suffering a housing shortage, estimating that 108 million Nigerians were homeless.
According to the Bureau, the 100,000 homes created each year are insufficient to address the housing shortage. According to Buylandinlagos.com, the mortgage rate in Nigeria ranges from 20 to 27 percent if you go to a traditional bank, but it can be as low as 6% to 9% if you borrow from the National Housing Fund.
What Are the Mortgage Banks Available in Nigeria?
The major mortgage banks available in Nigeria include:
- FBN Mortgages Limited
This is a major Primary Mortgage Bank (PMB) focused on providing the best mortgage banking services and products that reflect its parent company’s dominance in the financial services industry.
FBN Mortgages is uniquely positioned to assist customers in taking those important stages toward seamless homeownership and real estate growth as a committed provider of a comprehensive range of mortgage and real estate financing solutions.
- Platinum Mortgage Bank Ltd
This represents a major Primary Mortgage Institution in Nigeria. It was established in 1992 by the Corporate Affairs Commission to provide savings, loans, and homeownership services, and it is licensed to provide mortgage banking services in Nigeria by the Central Bank of Nigeria and the Federal Mortgage Bank of Nigeria, respectively, under CBN Decree 24 of 1991 and FMBN Decree No. 53 of 1989.
PMB Limited, formerly known as Platinum Home Investment and Mortgage Limited and headquartered in Lagos, was recapitalized into a strong Primary Mortgage Institution backed by innovative products, services, cutting-edge information technology, and competent management.
- The Federal Mortgage Bank of Nigeria
Formerly known as the Nigerian Building Society (NBS), The Federal Mortgage Bank of Nigeria, was founded in 1956 as a partnership venture between the Commonwealth Development Corporation and the Nigerian Eastern and Federal Governments.
The Bank serves as a useful tool for expanding long-term capital mobilization, lending volume, and mortgage lending services to all segments of the Nigerian people.
For most borrowers who don’t have hundreds of thousands of dollars in cash to buy a home outright, mortgages are a necessary component of the process.
There are many various sorts of home loans to choose from, depending on your situation. Various government-sponsored programs enable more people to qualify for mortgages and realize their ambition of homeownership.