Owning a home is the Nigerian dream, but with property prices ranging from ₦15 million to over ₦500 million in major cities, most people need a mortgage to make it happen. Understanding how mortgages work in Nigeria—the options available, eligibility requirements, and application process—is crucial for anyone planning to buy property.
Nigeria's mortgage market has evolved significantly, with government intervention programs, commercial bank offerings, and innovative fintech solutions making homeownership more accessible. This comprehensive guide covers everything you need to know about getting a mortgage in Nigeria.
🏠Key Mortgage Facts in Nigeria
- NHF loans offer the lowest rates at 6% per annum
- Commercial mortgage rates range from 15-25% annually
- Most mortgages require 10-30% down payment
- Maximum tenure is typically 20-30 years
- You must be an NHF contributor for 6+ months for NHF loans
Understanding Mortgages
A mortgage is a loan specifically for purchasing property. The property itself serves as collateral—if you fail to repay, the lender can seize and sell it to recover their money. Mortgages are long-term loans, typically spanning 10-30 years, making monthly payments affordable even for expensive properties.
How Mortgages Work
When you get a mortgage:
- The lender pays the property seller on your behalf
- You repay the lender in monthly installments over the loan term
- Each payment includes principal (loan amount) and interest
- The property title is held as security until full repayment
- Once fully repaid, you receive unencumbered ownership
Key Mortgage Terms
- Principal: The amount borrowed
- Interest Rate: The cost of borrowing, expressed annually
- Tenure/Term: Repayment period (e.g., 20 years)
- Down Payment/Equity: Initial payment you make (typically 10-30%)
- Collateral: The property securing the loan
- Amortization: How payments are structured over time
Mortgage Options in Nigeria
1. National Housing Fund (NHF) Loans
The NHF is a government scheme that provides the most affordable mortgages in Nigeria. It's funded by mandatory contributions from formal sector employees.
- Interest rate: 6% per annum (the lowest in Nigeria)
- Maximum loan: ₦15 million
- Maximum tenure: 30 years
- Equity contribution: 10% minimum
- Eligibility: Must have contributed to NHF for at least 6 months
How to access NHF loans:
- Ensure you're registered and contributing (2.5% of basic salary)
- Identify a property within the loan limit
- Apply through a Primary Mortgage Bank (PMB) accredited with FMBN
- Submit required documents and wait for approval
2. Federal Mortgage Bank of Nigeria (FMBN) Products
FMBN offers several mortgage products beyond the basic NHF loan:
- Home Renovation Loan: Up to ₦1 million for property improvements
- Construction Loan: For building on owned land
- Estate Development Loan: For developers
3. Commercial Bank Mortgages
Major Nigerian banks offer mortgage products with varying terms:
| Bank | Interest Rate | Max Amount | Max Tenure |
|---|---|---|---|
| GTBank | 18-22% | ₦100M+ | 20 years |
| Access Bank | 16-22% | ₦100M+ | 20 years |
| First Bank | 17-23% | ₦150M | 20 years |
| UBA | 18-24% | ₦100M | 20 years |
| Zenith Bank | 17-22% | ₦150M | 20 years |
4. Primary Mortgage Banks (PMBs)
These specialized institutions focus exclusively on housing finance:
- Infinity Trust Mortgage Bank
- First Trust Mortgage Bank
- Abbey Mortgage Bank
- Nigeria Mortgage Refinance Company (NMRC) partners
5. Family Homes Fund (FHF)
A government initiative providing affordable housing and mortgages for low-income Nigerians:
- Targeting low and middle-income earners
- Affordable interest rates
- Partnerships with state governments and developers
Mortgage Eligibility Requirements
Requirements vary by lender, but generally include:
General Requirements
- Age: 21-60 years (loan must be repaid before retirement)
- Employment: Stable employment or verifiable income source
- Income: Monthly income sufficient to cover payments (debt-to-income ratio typically below 40%)
- Down payment: 10-30% of property value
- Credit history: Good standing with no defaults
- Property documentation: Valid title documents for the property
Required Documents
- Valid ID (passport, driver's license, national ID)
- Recent passport photographs
- Employment letter/confirmation
- Last 6-12 months salary slips
- Last 6-12 months bank statements
- Tax clearance certificate
- NHF registration (for NHF loans)
- Property title documents (C of O, survey plan, etc.)
- Property valuation report
- Sale agreement or offer letter
For Self-Employed Applicants
- CAC registration documents
- Audited financial statements (2-3 years)
- Business bank statements (12 months)
- Tax clearance certificates
- Business profile and references
The Mortgage Application Process
Step 1: Assess Your Affordability
Before applying, calculate how much you can afford:
- Your monthly mortgage payment should not exceed 30-40% of your income
- Consider additional costs: insurance, maintenance, property taxes
- Factor in your down payment savings
Step 2: Get Pre-Approved
Pre-approval gives you a clear budget and shows sellers you're serious:
- Submit preliminary documents to your chosen lender
- Receive an indication of how much you can borrow
- Pre-approval typically valid for 3-6 months
Step 3: Find Your Property
Search for properties within your approved budget:
- Work with reputable real estate agents
- Verify property documentation
- Conduct physical inspections
- Check for encumbrances or disputes
Step 4: Submit Formal Application
Once you've found a property:
- Submit all required documents
- Pay application and processing fees
- The lender conducts property valuation
- Legal verification of property title
Step 5: Approval and Offer
If approved:
- Receive formal offer letter with terms
- Review all conditions carefully
- Negotiate if possible
- Accept the offer in writing
Step 6: Legal and Insurance
Before disbursement:
- Property insurance is mandatory
- Life/mortgage protection insurance often required
- Legal documentation preparation
- Mortgage deed registration
Step 7: Disbursement
The lender releases funds:
- Typically paid directly to the seller
- You pay your equity contribution
- Property title is perfected with mortgage annotation
- You take possession of the property
Calculating Your Mortgage Payment
Understanding your monthly payment helps you budget effectively:
Example Calculation
Property value: ₦50,000,000
Down payment (20%): ₦10,000,000
Loan amount: ₦40,000,000
Interest rate: 18% per annum
Tenure: 20 years
Monthly payment: Approximately ₦600,000
Total amount paid over 20 years: Approximately ₦144,000,000
Total interest: ₦104,000,000
⚠️ Important Consideration
High interest rates significantly increase the total cost of homeownership. At 18% over 20 years, you pay more than 2.5x the original loan amount. This is why the NHF at 6% is so valuable—the same loan would cost far less over time.
Tips for Getting Mortgage Approval
1. Improve Your Credit Score
Pay all existing debts on time, reduce credit utilization, and check your credit report for errors.
2. Save a Larger Down Payment
A larger down payment reduces the loan amount needed and shows the lender you're financially responsible. It may also help you get better rates.
3. Reduce Your Debt-to-Income Ratio
Pay off other loans before applying. Lenders want to see that you have sufficient income to handle mortgage payments.
4. Verify Property Documentation
Ensure the property has proper titles. Properties with documentation issues are harder to finance.
5. Register for NHF
If you're in formal employment, register and contribute to NHF. Even if you don't use it for your first home, it's a valuable option.
6. Consider New Developments
Some developers have partnerships with mortgage providers, making the process smoother.
Challenges with Mortgages in Nigeria
High Interest Rates
Commercial mortgage rates of 15-25% make monthly payments expensive and significantly increase total cost. The NHF's 6% rate is the exception.
Property Title Issues
Many Nigerian properties lack proper documentation, making them ineligible for mortgage financing.
Income Verification
The large informal sector makes income verification difficult, excluding many potential homeowners.
High Property Prices
Urban property prices have risen faster than incomes, making large down payments challenging.
Short Tenure Options
While 20-30 years is standard globally, some Nigerian lenders offer shorter maximum tenures, increasing monthly payments.
Frequently Asked Questions
How much deposit do I need for a mortgage in Nigeria?
Most lenders require 10-30% of the property value. NHF loans require a minimum of 10%, while commercial banks typically ask for 20-30%.
Can I get a mortgage without formal employment?
Yes, but it's more challenging. Self-employed individuals need to provide business registration, audited accounts, and tax clearance. Some lenders have products specifically for self-employed borrowers.
What happens if I can't pay my mortgage?
Contact your lender immediately if you anticipate difficulties. Options include loan restructuring, payment holidays, or in extreme cases, selling the property. Continued default leads to foreclosure where the lender seizes the property.
Can I pay off my mortgage early?
Yes, most mortgages allow early repayment, though some charge prepayment penalties. Check your loan agreement for specific terms.
Is it better to rent or buy in Nigeria?
It depends on your circumstances. Buying builds equity and provides stability, but requires significant upfront capital and commitment. Renting offers flexibility but no asset building. Consider your financial situation, stability, and long-term plans.
Conclusion
Getting a mortgage in Nigeria is challenging but achievable with proper preparation. The NHF scheme offers the most affordable option for eligible contributors, while commercial banks provide alternatives for those who need higher loan amounts or don't qualify for NHF.
Start by assessing your financial situation, registering for NHF if employed, saving for a down payment, and researching properties with proper documentation. With patience and planning, homeownership is within reach for many Nigerians.
Remember: a home is likely your largest financial commitment. Take time to understand all options, compare offers, and ensure you can comfortably afford the monthly payments for the long term.