Have you heard of the term mortgage?
Chances are that you may have heard of the word mortgage before. Our relatives
abroad might have bought homes through these vehicles or we might have heard political
aspirants talking about “mortgaging the future”. What is this elusive word
really? A mortgage is a type of loan where the bank holds onto the title deeds
of a property and provides an amount of money in exchange for it. The arrangement
is that the bank returns the right to the property on repayment of the loan. Mortgages
are mostly used to purchase or build houses. So, why the big deal about
mortgages? Homeownership is one of the best ways to measure the wealth of a
nation. The cost of a home may be the biggest purchase a family could ever make
during the lifetime of its founders. A home is also one of the safest and most
acceptable collaterals a bank or financial institution can accept. Are you sold
on this beautiful vehicle yet? What should you know about mortgages in Nigeria?
Every
Working Nigerian can access the National Housing Fund. The National Housing Fund was established by the National Housing
Act 3 of 1992. It permits Nigerians to contribute 2.5 percent of their basic
monthly salary to the Fund. According to the bill, this contribution can then
be used by mortgage firms to facilitate the acquisition of new homes.
Subscribers to the National Housing Fund are eligible to apply for loans after
6 months of remittance. The National Mortgage Bank who is the manager of the
fund, states that Individual subscribers to the National Housing Fund can
access a maximum loan of N15 million at a 6% per annum for a 30-year period.
Repayments are made in monthly installments.
Nigerian
Mortgage rates are inhibitively high. Nairametrics,
a Nigerian finance blog reported that the average commercial mortgage rate in
Nigeria is between 12% to 25% per annum. Juxtapose with the US at 5.4%, UK at
3.09% and Hong Kong at 2.30%; its too high for comfort. Mortgage interest rates
are directly affected by our Monetary Policy Rate (MPR) at 11.5%. The MPR which
is the rate at which government bonds are paid, directly affects the rates
banks give out loans and mortgages. Lower mortgage rates will mean more prospective
home owners and developers will approach the housing market.
Smallsmall Tech has a mortgage based product
that makes home ownership possible for virtually anyone interested in investing
in Real Estate. This is our Buy-2-Let program. With this program, professionals
can buy homes with a down payment alone. These units are on boarded to our Rent
Smallsmall and StayOne platforms where eager subscribers are waiting to find
homes with flexible living and payment arrangements such as our monthly
subscription system. The mortgage repayment will now be a fusion of
income derived from subscriptions to the home and mortgage repayment
installments. The mortgage repayment installments will only be necessary if the
subscription collected from the home cannot cover the loan payments. Its
uniqueness is that it doesn't put a strain on your income as most mortgages do.
If you have questions about mortgages, type it in the comments section and
we'll be sure to respond.