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Mortgage financing set to take off

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With Nigerians now being able to apply for and receive long term mortgages of up to 20 years, by the government through the Nigerian Mortgage Refinance Corporation (NMRC), citizens are now beginning to see a new face to a government that has all too often let them down in the performance of its key duties. As regards its promises for the Nigerian housing sector, the government, under President Jonathan has now launched the first tranche of 10,000 affordable mortgages.

During the launch of the NMRC, President Jonathan promised that the NMRC will become operational by the end of the 2014 Q2 and that Nigerians will be able to apply for re-financeable mortgages by 2014 Q3. This has been the case so far.

However, for citizens to fully take advantage of the government’s effort, PMBs have the duty to better educate their clients on how they can benefit from the NMRC-supplied homes. Some of the issues that potential home owners will have to consider in order to benefit from the scheme include:

Eligibility and Prequalification:

The Finance Minister, during the launch of the 10,000 mortgages, made it clear that applicants must meet specific eligibility criteria to qualify for the mortgages. The essence of the prequalification was to create a level playing field for all Nigerians, and ensure that the system was sustainable over the long run. This essentially means that potential candidates must be able to repay the mortgages over the specified maximum life time of the mortgage (20 years, for starters). Without repayment of the mortgage, the financing and refinancing cycle of the mortgage will crash, taking down the Mortgage and Commercial banks, as well as the entire NMRC scheme. Capital market investors will not also be left out, as significant interest from the capital market will have been entrenched in the scheme as it expands over time, according to expectations.

The housing sector if it lives up to its billing may potentially grow to become one of the pillars on which the Nigerian macro-economy will stand. For potential buy-side threats to be forestalled, due-diligence will have to be taken seriously. One way in which this will be manifested is in the insistence that an eligible borrower must obtain a satisfactory credit report from 2 credit bureau agencies licensed by CBN, going by the NMRC’s Draft Eligibility Criteria.

So how do users become eligible and prequalified?

For users to be eligible, they must be citizens. The underlying home must be owner-occupied; it cannot be the subject of a sublet. The applicant must be 21 years old at least, and be an earner of regular income who pays tax. A down payment of 20 percent of the value of the home must also be made by the applicant, while the outstanding 80 percent can be spread out over the agreed mortgage lifetime.

To prequalify, applicants must apply via the government designated portal ( after which the application is reviewed by a selection panel and forwarded to potential mortgage providers.

The prequalification process is expected to take between three to six weeks, subject to the PMB’s risk analysis procedures, and level of perceived risk to be undertaken, as well as the volume of transactions being undertaken.

Terms of the mortgage

NMRC mortgages can only be sought for homes costing between N2 million and N20 million. Homes outside of the prescribed value range might not be considered.

As for the interest payments on NMRC financed homes, interests will be fixed for the minimum period equivalent to the corresponding refinance. Typically, clients can expect interest rates of low-to-middle double digit, 2.5 percent above the rate at which the sovereign borrows.

Maximum length for the repayment of the mortgage is 20 years. Borrowers that would want to prepay, or repay the principal balance of their mortgage loan before the expiration of the term can do so, but subject to a penalty fee by the PMB.

The borrower will also pay to the mortgage bank on an annual basis a fee not exceeding fifty basis points (0.5%) of the outstanding balance of the loan.

Loan repayments are structured such that the loan will be fully repaid by the end of the period for which it is written. In no case may the remaining principal amount that is owed increase during the time that the loan is outstanding. (No Negative Amortization)


Repayment will be made by a deduction from the borrower’s income at source, and through the borrower’s employer. Borrowers will be expected to leave a direct debit order to cover the fees.

Payments that are received more than seven (7) days after they are due will be subject to a late charge

Article Credit: Businessdayonline

Updated 4 Years ago

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Tags:     NMRC     President Jonathan     CBN