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ABC of Mortgages

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.

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