How to Buy a Mortgaged Property in Nigeria

  | 7 min read
How to Buy a Mortgaged Property in Nigeria

Purchasing a property is a significant milestone in anyone’s life, and in a vibrant country like Nigeria, the real estate market presents numerous opportunities. However, navigating the process of buying a mortgaged property in Nigeria requires careful planning and understanding of the intricacies involved. Whether you’re a first-time buyer or an experienced investor, this blog post aims to provide you with a comprehensive overview of the essential steps and considerations when purchasing a mortgaged property in Nigeria.

In this guide, we’ll delve into the key aspects you need to know before embarking on your property purchase journey. We’ll explore the benefits and challenges of buying a mortgaged property, highlight the various types of mortgages available in Nigeria, and discuss the factors to consider when selecting a suitable mortgage product. Additionally, we’ll outline the step-by-step process of buying a mortgaged property, shedding light on legal requirements, due diligence, property valuation, and the necessary documentation.

Buy Property anywhere in Nigeria today!

Understanding the intricacies of the Nigerian real estate market, as well as the mortgage landscape, is crucial for making informed decisions and ensuring a smooth and successful property acquisition process. With the right knowledge and preparation, you can confidently navigate the challenges and seize the opportunities presented by the Nigerian property market.

What is Mortgage in Real Estate?

A mortgage is a financial arrangement in the real estate industry that enables individuals or businesses to borrow money from a lender, typically a bank or financial institution, to purchase a property. It is a type of loan secured by the property itself, which means that if the borrower fails to repay the loan, the lender has the right to take possession of the property through a legal process known as foreclosure.

When obtaining a mortgage, the borrower agrees to make regular payments, typically on a monthly basis, over a specified period of time, usually ranging from 15 to 30 years. These payments consist of both principal (the amount borrowed) and interest (the cost of borrowing). The property being purchased serves as collateral for the loan, providing security for the lender.

Benefits of Mortgage

  • Affordable Homeownership: One of the primary benefits of a mortgage is that it enables individuals to afford and achieve homeownership. By spreading the cost of a property over a longer period, borrowers can make manageable monthly payments instead of paying the full purchase price upfront.
  • Capital Appreciation: Owning a property through a mortgage allows homeowners to benefit from potential capital appreciation. Over time, as property values increase, the equity in the home grows, which can be advantageous if the homeowner decides to sell or leverage the property for other financial needs.
  • Leverage: With a mortgage, buyers can leverage their investment. By using a relatively small amount of their own money as a down payment, they can gain control over a more substantial asset. This leverage has the potential to yield higher returns on investment if the property value increases.
  • Tax Deductibility: In some jurisdictions, mortgage interest payments may be tax-deductible. This can result in potential tax savings for homeowners, reducing their overall tax liability and increasing their disposable income.
  • Financial Flexibility: Having a mortgage provides financial flexibility. Rather than tying up a significant amount of capital in a property purchase, homeowners can allocate their funds for other investments, emergencies, or personal expenses. This liquidity can offer a greater sense of financial security.
  • Building Equity: As homeowners make mortgage payments, they build equity in their property. Equity represents the portion of the property’s value that the homeowner owns outright. Over time, as the mortgage is paid down, equity increases, providing a valuable asset and potential borrowing power for future needs.
  • Stability and Security: Owning a home through a mortgage can provide stability and security. It offers a sense of permanence, the freedom to make modifications and improvements, and the ability to create a living space tailored to one’s preferences. Homeownership can also provide a stable living environment for families, offering a sense of community and belonging.

Buy Property anywhere in Nigeria today!

So, if you’re ready to embark on your journey to buy a mortgaged property in Nigeria, let’s dive into the essential information you need to know to make your real estate dreams a reality.

How to Buy a Mortgaged Property in Nigeria

Requirements to get a mortgaged property in Nigeria

  • Monthly income
  • Your monthly expenditure
  • Existing debt profile or Record
  • The value of the property you want to be financed
  • Investigate if you can afford a mortgage

Steps to Buy a mortgaged property in Nigeria

1. Save for an Initial Deposit:

Begin by saving an initial deposit for the house you intend to purchase. The deposit amount varies depending on the real estate company or developer and the requirements of the mortgage institutions you approach.

2. Assess Affordability:

Conduct thorough research on mortgage terms and conditions to enhance your understanding. Determine if your income can comfortably cover the mortgage repayment, which typically spans several years. Utilize mortgage calculators available on the websites of banks or other mortgage institutions to estimate monthly payment amounts.

3. Explore House Buying Schemes:

Look into house-buying schemes designed to assist homebuyers in accessing mortgage loans at subsidized interest rates. For example, consider the Federal Housing Authority (FHA) mortgage bank, a primary mortgage institution facilitating financing, acquisition, renovation, and development of residential, commercial, and industrial properties.

4. Search for Mortgage-Friendly Properties:

Focus on properties that can be financed through a mortgage, with an emphasis on off-plan projects or properties that have mortgage plans in place.

5. Secure a Mortgage Loan:

Once you have made the initial deposit, proceed to secure your loan from a suitable financial institution. Carefully review the terms and conditions before signing any documents, and don’t hesitate to ask questions to ensure clarity and understanding.

What are the Registered mortgage banks in Nigeria?

They include:

  • Abbey Building Society Limited Mortgage Lenders.
  • AG Homes Savings and Loans Limited.
  • Akwa Savings and Loans Limited.
  • Aso Savings and Loans PLC.
  • Brent Mortgage Bank.
  • Centage Savings and Loans Limited.
  • City Code Savings and Loans Limited Mortgage Lenders.
  • Coop Savings and Loans Limited.

You can see more mortgage banks and institutions here.

Obstacles to Securing a Mortgage in Nigeria

  1. Lack of Knowledge and Experience: Insufficient understanding and experience in securing and managing mortgages can hinder the process. Lack of familiarity with the requirements, procedures, and documentation involved may pose challenges.
  2. Inadequate Awareness of Initial Deposit: Many individuals may not be aware of the smaller deposit required for the initial mortgage payment. This lack of knowledge can discourage potential borrowers from pursuing a mortgage or cause them to delay their plans.
  3. Limited Collateral Options: Some mortgage institutions may have strict collateral requirements, which can pose difficulties for borrowers who do not possess sufficient collateral assets to secure the loan. This can be a significant obstacle, especially for first-time buyers or individuals with limited assets.
  4. Insufficient Research on Mortgage Institutions: Lack of thorough research on various mortgage institutions and their offerings can impede the mortgage process. Without proper exploration of available options, borrowers may miss out on more suitable mortgage products or favorable terms and conditions.

In conclusion, securing a mortgage to purchase a property in Nigeria can be a significant milestone in achieving homeownership or expanding one’s real estate portfolio. However, it is essential to navigate the process with careful consideration and knowledge of the challenges and requirements involved.

Throughout this blog post, we have explored the essential steps and considerations when buying a mortgaged property in Nigeria.

Remember, each person’s journey to securing a mortgage may be unique, and seeking professional advice from mortgage experts and real estate professionals is highly recommended. With the right knowledge, preparation, and guidance, you can confidently embark on your path toward buying a mortgaged property in Nigeria and make your real estate dreams a reality.

Christian Nduaguba