17 Mar Challenges in Buying A House in Nigeria (Lagos, Abuja etc) With Mortgage
Unlike developed economies, buying a house with mortgage in Nigeria is still quite very difficult. In developed economies in Europe and America, home ownership is made easy through affordable mortgages.
Mortgages are simple loans given to individuals with an evidence of a reliable source of monthly income. These house mortgages can run up to 15 to 30years in some countries.
But here, a lot of Nigerians ain’t aware if such loan exists, those that are aware of it find it very hard to be able to buy a house in Nigeria using a mortgage loan.
So, why is it that hard to get a house mortgage in Nigeria?.
1) Low Awareness
Since a lot of Nigerians are not aware of home mortgages, how to apply for it or how to obtain it. Buying a house with mortgage in Nigeria, continues to be a myth to most people.
Moreover, most of the commercial banks in Nigeria with a mortgage arm e.g. First Bank, Guaranty Trust Bank, UBA, Access Bank etc. hardly run massive promotions on their mortgage sectors, as they do on their commercial activities.
So even some of their customers banking with them, don’t know their bank offer mortgages.
2) Strict Requirements
When you simply view the long list of the mortgage requirements in Nigeria, you’re already discouraged. Mortgage banks in Nigeria ask for everything and charge for everything.
For the information you provide, the bank will still charge you to validate and verify those information, really funny.
In Nigeria, where there is no centralized tax system, and no centralized financial database system. It’s pretty difficult for an average Nigerian, to meet up some of the documents required for applying for a house mortgage.
In all honesty, buying a house with mortgage in Nigeria, is not for an average Nigerian, will explain more below.
3) High Inflation and Interest Rate
The National Housing Fund Mortgage (NHF), offers 6% interest rate for up to 30years mortgage (official rate, mortgage institutions have been reported to add to that interest rate when the loan is disbursed). While Commercial Mortgages range from 15% to 22% interest, that’s extremely high.
To make it clearer, for NHF mortgage loan of N15m, payable in 15years, at 6% interest per annum. After equity of 10% (N1.5m), you’re to pay back N20,505,560 (excluding insurance, mortgage deed and several other charges).
But, for a commercial mortgage in Nigeria, of N15m, payable over 15years. After 20% equity (N3m), at 18% interest per annum, you’re to pay back N34,785,000, I guess you’re scratching your head already.
4) High Risk
Another opportunity to buy a house with mortgage in Lagos and Abuja is through offplan development. Offplan houses are projects developers sell while the house is under construction.
In addition, some offplan development in Lagos and Abuja can offer up to 2 years mortgage to spread payment, allowing you to pay monthly, quarterly or at your pace as the project progresses.
However, buying houses on offplan is risky, as delivery of the houses can take time, might be slow and because you’re buying the house on 3D, you don’t have a reality view of what the rooms or interiors will actually look like.
Furthermore, the longer the duration of payment offered by the developer e.g. 3yrs, 5yrs etc, the longer it will take for the project to get completed.
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