What to know about mortgage in real estate

For most Nigerians that have served the government or being into civil service for donkey years it is almost impossible that they save enough to own a piece of land talk-less having money to build their own houses. Therefore, many Nigerians do require one form of assistance or the other to become landlords. This assistance normally should come in form of mortgage, however how many Nigerians can really access mortgage to get their own houses? Does our mortgage system really work? Debo Adejana, MD/CEO Realty Point Ltd, explains what one needs to know about mortgage in real estate. Mortgage is a lien on a property or house that secures a loan and is usually paid “Interest + Principal” in installment over an agreed period of time. The Mortgage secures your promise that you will pay
back money you borrowed to buy a home a property. Mortgage comes in diverse shapes and sizes, each with its own merit and demerit. It is very important though that you make the right choice regarding mortgage and you have to consider your future plans and your financial situation to be able to do that. Mortgage elegibility There are major criteria or yardstick that is used to qualify someone or anyone that approaches a mortgage bank in search of a loan or funds to acquire a landed property or home. One of the criteria used in assessing mortgage eligibility is the income of the mortgagor. There is a percentage or portion of your income that must go into the mortgage which is usually not more than one-third or 33.3% of your total income or earnings. In addition, you have to have built some sort of relationship with the financial institution you are accessing the mortgage through. To put it in plain terms, you must have opened an account with the mortgagee for at least a period of six months. It’s more like a KYC thing (Knowing Your Customer), so by the time you come with your request you would have had some sort of financial history with the mortgagee, and they can then assess or look into your transactions with them. Role of age in accessing mortgage Considering that the retirement age in the country is usually between 60-70 years depending on the sector you find yourself, invariably the younger you are the more qualified you will be at accessing mortgage. What this means is that, if you are close to 60 or 70 it means you have limited time on your factor and plays a huge role in your eligibility for a mortgage. Therefore you cannot take a mortgage for 30 years if you are 40. You can only take mortgage with a payment period of about 20 years. Young people have the opportunity of taking longer tenure on their mortgage transactions. Also, the longer the tenure the more affordable your mortgage repayment is, especially when the interest rate is the same. Another thing to note is that if you take a loan with a payment period of 20 years, by the time it gets to 20 years you would have paid more than someone who settled his/her mortgage in 10 years.  Mortgage varieties There are different Mortgage institutions that come up with diverse forms of Mortgage to be able to package their products in order to make it more accessible and affordable to the mortgagor. Some reduce their equity contribution which these days is between 20-30  percent.