Mortgage Frequently Asked Questions
What is a Mortgage?
A mortgage is a term lending facility offered by a bank or finance house to an eligible applicant to part-finance the acquisition of a residential or Buy to Let property at locations approved by the Bank. The credit product is usually for a long term e.g. 20 years and often requires a deposit contribution from the applicant.
How do I find a Mortgage?
Finding the right mortgage can be daunting considering the barrage of products out there and the different qualifying criteria that you would need to meet. Not to worry though, we can search the market for you and display a range of mortgages that are likely to meet your needs. If you need further information, you may call the provider directly to find out more.
What type of property can I acquire with the Mortgage?
Generally there are 2 kinds of mortgage applications – Residential and Buy to let. A residential mortgage part-finances the acquisition of a residential property where the applicant intends to live and make his primary residence address. A buy to let mortgage part-finances the purchase of a property to rent out and earn rental income.
What are the types of Mortgage available?
Fixed: Your repayment is tied to a fixed rate of interest over a term which could range from 1-5 years or even up to the entire term of the loan. It means that no matter how the rate moves, your repayments will be fixed over the length of the agreed period.
Variable: Your mortgage is tied to the interest rates over the agreed term, which implies that your repayment may go up or down in response to how the rate varies.
What is a Residential Mortgage?
Residential mortgages are solely for residential purposes only. You must live in the property and declare your intent to do so at the time of application. If your circumstances change, you must inform your provider immediately. This type of mortgage is often at a much cheaper rate, more available, often lesser fees. They are typically principal and interest repayment, but some are interest only.
What is a Buy to Let Mortgage?
This type of mortgage allows you to lend against your property acquisition with the intention of renting it out and earning rental income. The rates are usually higher than residential mortgage, often higher fees and interest only.
Can I repay my Mortgage early?
Yes you can repay early or opt out of the deal, but remember that you are likely to be charged an early repayment fee
Are there fees and charges?
Yes, there are different types of fees that you need to consider and add to your overall cost. These generally include:
Set up Fees: Fees that cover the administrative cost of setting up the facility, your lender will inform you about these at the point of setting the mortgage up.
Arrangement Fees: A non-refundable type of one off fee that can be added to the loan or you may opt to pay it off at the start of the loan.
Booking Fees: Usually a product booking fee charged by the lender, which may be non-refundable
Legal Fees: This covers searches, document verifications, land titles, legal agreements and other ad-hoc tasks the legal team may cover.
Miscellaneous: There are other small fees you may have to pay before taking out the loan
How does Repayment work?
When you take out a mortgage, you’ll need to put down a lump sum contribution called Deposit that covers a percentage of the property you want to acquire, say 10%. The remainder of 90% is financed by your bank, and you are required to repay your loan over the agreed term, say 25 years. You can choose to repay both loan interest and principal monthly, quarterly or you may choose to only pay the interest now.
Where you only pay interest now, at the end of the term of the loan, you will still owe the principal amount you borrowed plus any additional fees added to the loan.
Can I use the Mortgage to acquire a property in any location in Nigeria?
No. The location has to be approved by the lender. You may struggle to get finance if you choose a location the bank does not cover. Do your research carefully.
Generally, what are the approved locations for getting a Mortgage?
The criteria varies from lender to lender, but lenders in Nigeria generally consider low and medium density areas in Lagos, Abuja, Port Harcourt and all state capitals.
What if I am self-employed?
There are lenders that will only offer you a mortgage if you are self-employed. Some of those may consider going through your accounts, business performance etc. to determine your eligibility.
What is the minimum and maximum loan amount that I can secure?
This depends on the lender and your eligibility. Typically, mortgage offers range from N5m to N200m, but this may vary.
Is collateral required?
Yes. The collateral is the property the bank has issued lending against, i.e. your property. Your home may be repossessed if you fail to make regular repayments as agreed and when due. Think carefully, consider the affordability of the facility and ensure that you can keep up with your monthly payments.
What repayment options are available on a Mortgage?
You have the flexibility of choosing either equal monthly repayments comprising principal and interest, or quarterly, semi-annual or annual repayment of the principal, while you service interest on a monthly basis. There are other agreements that you can have with your lender to suit your needs. For example, you can request a repayment holiday, where your lender allows you a cooling off period from making repayments.
Is there a maximum portion of my net monthly salary that can be used to repay the Mortgage?
This depends on your Bank. Some require a maximum of between 30% – 35% of your net monthly salary to service mortgage facilities.
What are the documents required to access a Mortgage?
This also depends on the provider, but lenders generally will require the following documents to proceed with your application:
a) Title document b) Application c) Employer undertaking d) Search report e) Valuation report f) Offer from vendor
How long can I borrow for?
The maximum term varies depending on the lender, your age and product type. Generally, banks lend for up to 20 years and in some cases 25 years. Your age comes into play if you are over 45, due to retire at a retirement age of 55 years. In this case, your lender may only be able to offer you a tenure of 10 years maximum.
Is there a minimum period?
Yes. In most cases, the minimum tenure is 1 year
Does my employment status count towards my application success?
Yes. Your lender wants to be sure that you can afford to repay the mortgage monthly and one of their key criteria is to confirm that you are gainfully employed by a reputable organisation, and a confirmed member of staff that has been employed with the organisation for at least a month.
Do I require home insurance?
Yes. Lenders make it mandatory for you to hold a good home insurance policy with comprehensive cover for fire and disasters. You are responsible for taking out this type of insurance.