Hello everyone, today we will be talking about mortgage loans and the factors you need to consider when applying for a mortgage. Everyone wants to be a homeowner, but not everyone can afford to purchase a property immediately or over a couple of months. This is where mortgage loans come in.

Mortgage loans simply allow a prospective homeowner to acquire the property of their choice and pay it back usually over an extended period of time, such as 15 to 30 years in some cases. These loans are accessible through different lenders, who offer different loan terms and conditions. Mortgage loans are offered by the Federal Mortgage Bank of Nigeria which is accessible to the public through accredited mortgage lending organisations and banks.

A mortgage is made up of two elements

The capital, which is the amount the buyer borrows to buy the property and

The interest, which is the amount the lending organisation charge to lend you the money.

Before a mortgage can be approved, the lending organisation will need to confirm that the prospective buyer can actually afford the monthly payments on the property. The mortgage secures your promise that the money borrowed will be repaid. If the buyer defaults on the loan payment, the property is repossessed and the lender can sell the property to recoup the money owed.

Choosing a Mortgage

There are three important aspects that should be critically considered when deciding on a mortgage plan for a property:

1. Interest rates: Interest rates are very often considered the most important thing when deciding on which mortgage to choose. This is because the lower the interest rate, the less money you have to pay back. Interest rates in Nigeria vary from 15% to 40%.

2. Repayment terms: Mortgage payments are usually made monthly and can be done in two ways. The first is by monthly payment of both the capital borrowed and interest attached to it. The second method is by paying on the interest attached to the capital borrowed and paying the capital in one lump sum at the end of the mortgage period. It is also worthy to note that there is a penalty that comes with paying off your mortgage loan early and it is called early redemption penalty.

3. Mortgage fees/charges: Also called administrative fees, these are charged by lenders to cover cost of valuation, legal, banking administration, etc. Lender fees vary from several hundred thousand to millions of Naira, depending on the mortgage you choose.


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