How Can Mortgage Banks Help You Become A Landlord (Detailed)

Have you ever sought ways to raise funds to buy your home? Or you are a Real Estate Developer and you need additional funds to grow your business? the Federal Mortgage Banks of Nigeria have helped thousands of Nigerians (Middle-low income earners) attain their dreams of becoming landlords.

You might be wondering how possible is this. This method is used by first-time home buyers, start-ups, high-flying property developers, and construction firms alike to raise capital for new projects.

Getting a mortgage loan in Nigeria could be a tedious process, but knowing the exact steps makes the process easier.

Here is a comprehensive guide for all you need to know on how you can become a Landlord with the help of a mortgage bank.

I suggest you pay attention to the steps, processes, and possible risks. First, let’s understand what a mortgage is all about.

What Is A Mortgage?

A mortgage is a legal agreement in which a person (BORROWER), borrows money from a LENDER to buy a house. And pays back the money over the years. A house loan.

ln a mortgage, the property or real estate is used as COLLATERAL.

The borrower enters an agreement with the lender (usually the bank) in which the borrower receives cash UPFRONT and makes payment over a specified period until the lender is paid back in full.

How Do Mortgage Loans Operate?

The collateral is held by the lender until full repayment of the loan. The repayment is done monthly and called EMI (Equated Monthly Installments).

EMI is a fixed sum a borrower repays to the lender monthly after collecting the loan.

In a mortgage, you don’t own the home till the mortgage is paid off, but you can take possession of the property. 

Mortgage Banks In Nigeria

Mortgage banks enable you to buy homes in Nigeria. They do this by giving you a set amount of money (loan), which you agree to pay back within several years with interest.

Take note that before giving you the loan, the bank will evaluate: 

• What you can pay through your current earnings and the foreseeable future. 
• The fair market value of the house you’ll want to buy through an appraisal.

Caution 

It is always advisable to take an amount you can afford to pay back (with or without a job)

This is because, in mortgages, the collateral used is the property you want to buy. 

So if you default beyond the penalty time, the bank will reclaim your home. This is called a FORECLOSURE.

What Are The Functions Of Mortgage Banks In Nigeria?

• Solicit Business 
• Loan Origination 
• Servicing of Mortgage 
• Perform Financial Counseling 
• Perform Financial Analysis

Types Of Mortgage Banks In Nigeria 

In Nigeria, there are two major types of Mortgage banks.

1. Federal Mortgage Bank of Nigeria 
2. Primary Mortgage Banks or Institutions.

In this article, we would run a comprehensive review of the two types of mortgage banks in Nigeria.

What Is The Federal Mortgage Bank Of Nigeria?

The Federal Mortgage Bank of Nigeria is regarded as the Apex of mortgage institutions in Nigeria and regulates the activities of the Primary Mortgage loan originators (PMBs).

The Federal Mortgage Bank of Nigeria (FMBN) is a wholesale and retail credit institution.

It was founded by the Federal Government of Nigeria in 1977 to replace the Nigerian Building Society which was founded in 1956. 

Also read: NHF Real Estate Development Loan (2023 Detailed Guide)

The Federal Mortgage Bank of Nigeria was founded to meet the housing needs of all citizens in the country.

Functions Of The Federal Mortgage Bank Of Nigeria (FMBN)

Federal Mortgage Bank of Nigeria(FMBN) is geared towards two active functions.

The development and regulation of the PMB (Primary Mortgage Banks) and Managing the National Housing Fund.

• They provide long-term credit to mortgage banks in Nigeria which enables them to grant house loans to individuals.
• The Federal Mortgage Bank of Nigeria(FMBN) Collects and maintains the National Housing Fund (NHF).
• They Provide long-term financing to home buyers, building materials firms, and Mortgage Financial Institutions.
• They guarantee construction loans from private investments.

What Services Does The National Mortgage Bank Of Nigeria (FMBN) Offer?

1. Rent-To-Own 

A scheme designed for Nigerian workers to move into Federal Mortgage Bank of Nigeria-owned properties as Tenants, and pay for and own the property through yearly or monthly rents. For a period of up to 30 years.

2. Diaspora NHF Loans 

This is targeted at Nigerians living abroad, to enable them to access mortgage loans to buy or build houses back home in Nigeria.

3. Construction Loan 

Designed to aid Nigerians who are NHF contributors to access mortgage loans to construct their homes.

4. Home Renovation Loan 

This helps Nigerian citizens access loans to renovate their homes. 

Estate Development Loan

This is a loan that property developers can access to build estates.

National Housing Fund (NHF)

NHF offers housing loans for a fixed interest rate of 6% per annum. NHF IS STRICTLY FOR RESIDENTIAL HOUSES. To buy, renovate or expand.

What Is The Purpose Of NHF In Nigeria?

NHF (National Housing Fund) was created by the Federal Government of Nigeria to expand mortgage financing to more Nigerians. The loan is usually for low to middle-income earners who cannot afford commercial loans to buy houses.

This includes a mandatory contribution scheme to mobilize funds to finance the mortgage sector.

Who Can Benefit From NHF (National Housing Fund) In Nigeria?

• Civil Servants 
• Self-employed Nigerians 
• Traders 
• NGO workers
• Commercial Drivers 
• Private Sector Workers.
• Artisans.

Benefits Of The National Health Fund (NHF)

• You enjoy a fixed interest rate of 6%  and up to a 90% loan on the cost of the house.

• Repayment period of up to 30 years 
•  If you decide not to take the loan, a refund is made to you at retirement(60 years of age or 35 years in Service) with 2% interest.

• The loan repayment is comparable to normal monthly rent payments.
• Loan amounts below 5 million attract no equity, and those above 5 million attract a 10% equity flat.
• Once the loan payment is completed, the house becomes an asset for you.

Who Is Eligible To Obtain NHF (National Housing Fund) In Nigeria?

• Must be 18 years of age or older 
• Should be earning above N3,000 monthly 
• Have a source of steady income 
• Must be a registered contributor to the National Housing Fund (6 months and above) and up-to-date with your payment.

How To Get Registered For A Federal Mortgage Loan

• Employers receive an Employers Registration Form (NHF1) from the FMBN 

• Employers will fill out the NHF1 form and return it to FMBN’s nearest branch.

• The FMBN registers the Employer and assigns an Employer Registration Number to them.

• The FMBN provides (NHF2) form 2 to the employers for their employees. For self-employed persons, fill out form 1 and form 2.

• Employees fill out the NHF 2 forms and return them to their company, for self-employed candidates, they return form 2 to FMBN.

• The FMBN registers all employees and assigns them individual participation numbers. 

• The FMBN provides a cash book to the employers for themselves and their employees to keep a record of the deductible 2.5% contribution fund.

• Employers deduct 2.5% from their employee’s salaries, and the employer submits the deduction records to FMBN. Employers (self-employed or otherwise) remit the funds directly to FMBN.

• The FMBN provides payment receipts in return.

• With this, the employees and employers are considered registered participants of the NHF.

How To Apply For Federal Mortgage Loans 

NHF (National Housing Fund) Act 3 of (1992) guides the Federal Mortgage Bank Loan in Nigeria.

As an individual, you apply through a registered and licensed (PMB) Primary Mortgage Bank of your choice. 

Also read: NHF Rent-to-Own, An Alternative Way To Own A House In 2023

This is because private individuals can not apply for the loan directly at the Federal Mortgage Bank of Nigeria.

Institutional borrowers can apply directly to FMBN of Nigeria for the loan.

• Visit any approved Primary Mortgage Bank (PMB) and open a savings account. Or visit their website and fill out the FHA mortgage Online forms.
• Use NHF employer 1 (employer) and NHF employer 2 (employee) forms to register, you’ll be given a passbook.
• Remit monthly contributions to FMBN for up to 6 months.
• Employers must update the passbook which is transferable from one job to the next
• Have satisfactory evidence of regular cash flow to guarantee the loan.
• Submit copies of valid title documents e.g C of O (you can use deeds or R of O but Certificate of Occupancy must be in view) 
• Approved survey/site plans.

What Are The Documents Required When Applying For The Nhf Loan?

• Completed application form 
•  Photocopy of title documents on the house you intend to buy.
• Current valuation report of the proposed house to buy or bills of quantity (BOQ) for the house to build (The house must be appraised)
• Your 3 years tax clearance certificate  Evidence of (National Housing Fund (NHF) participation 
• Copy of pay slips for the three previous months.
•  Equity contributions or personal stake depending on the loan amount applied for. (loans above 5 Million attract a down payment of 10% equity)

Contact Details Of Federal Mortgage Bank Of Nigeria (FMBN)

• Mail: Info@fmbn.gov.ng 
• Address; 266 Cadastral AO, Central Business District, PMB 2273 Garki, Abuja, Nigeria.
• Contact: 09-2920690, 09087973000, 08170237904
• Website:  https://www.fmbn.gov.ng 

What Are Primary Mortgage Banks In Nigeria?

Primary Mortgage Banks (PMB) are banks that offer loans for the acquisition of Real Estate Property, Then collect re-payments back in installments. They are primary lenders to whom borrowers can obtain a mortgage loan.

How Many Primary Mortgage Banks Are There In Nigeria?

The CBN has licensed 35 Primary Mortgage Banks in Nigeria. 10 are national banks and about 24 operate as state PMBs.

Interest Rates Of Primary Mortgage Banks In Nigeria

S/N	Mortgage Lender Name	Mortgage Rate (%)	Tenor (Up to)	Maximum Amount	Other Info
1	Standard Chartered Bank	15	20 yrs	N220M	Minimum monthly earning of ₦350,000.  Longer tenor subject to a maximum age of 60 years
2	First Bank of Nigeria	Variable	20 yrs	N50M	Available to individuals with verifiable and steady income flow. Minimum down payment of below 30%, subject to the location. Residential property only
3	United Bank for Africa (UBA)	Variable	20 yrs	N70M	Loan Amount up to 80% of property value subject to a maximum amount of N40m for properties in Abuja, Enugu, or Port Harcourt.
4	Access Bank	15 – 17	30 yrs	N500M	20% equity contribution for home loans. Commercial mortgage available
5	Fed Mortgage Bank of Nigeria	6	30 years	N15M	Any intending beneficiary must be a registered contributor with a Primary Mortgage Institution (PMI) and up to date with his/her contributions.
6	Guaranty Trust Bank (GTB)	Variable	20 yrs	N150M	Annual, semi-annual, or quarterly principal repayment while interest will be serviced monthly. Monthly repayment shall not exceed 50% of the net monthly salary.
7	Ecobank Nigeria	–	10 yrs	–	For buying a new home, renovating or refinancing your home. Available for completed buildings only
8	FirstTrust Mortgage Bank	Variable	15 yrs	N250M	This facility offers loans to Individuals to part-finance the purchase of a completed house that has valid title documentation. Equity contribution of 20% for salary earners and 30% for self-employed

Capital Requirements For Pmb

To obtain loans from Primary Mortgage Banks, you should be earning a salary of N300,000 to N500,000 monthly to be considered. 

What Is The Repayment Option For Primary Mortgage Banks In Nigeria 

The percentage deducted from your monthly income is 25%.

There are two options for loan repayment.

• Equated Monthly Installments (EMI)

In this option, there is a fixed amount that the borrower repays every month.

• Reducing Balance Basis (RBB)

In this option, you repay heavy sums at the beginning stages of the loan collection and pay smaller sums towards the end of the loan tenure. 

Application Process For Obtaining A Primary Mortgage Loan In Nigeria

• Visit any registered and government-approved primary mortgage bank and fill out the mortgage application form.
• Submit an introduction letter from your employer to verify that you work with the company 
• Copy of the documents for the property you want to purchase 
• An approved building plan for the house
• Paychecks or payslips for the last three months. This is to ensure you have a steady income source 
• You are required to present your bank account statement six to twelve months prior 
• A means of identification is either your National ID, International passport, or Drivers license.
• Your employment letter and confirmation letter. A confirmation letter can be used for jobs up to 2 years and above work experience.
• Utility bills 
• Domiciliation of the applicant’s salary account with the bank or mortgage institution.

Top 7 Reliable Mortgage Banks In Nigeria

1. FBN Mortgage Limited (National) 

FBN Mortgage Bank is a subsidiary of First Bank PLC, it was founded on the 17th of March 2003. FBN Mortgage is a PMB that typifies its parent FirstBank in the financial services industry. 

They run two types of packages.

Commercial Mortgage: This enables the acquisition of loans for landed properties intended for commercial purposes.

SME and Joint Mortgage 

This enables you and your spouse or business partner to easily buy a property jointly. 

2. Abbey Building Society Limited Mortgage Lenders (National) 

It is the premier, largest, and most profitable non-aligned mortgage bank in Nigeria. It is among the seven (7) national primary mortgage banks licensed by the Central Bank of Nigeria (CBN) and Federal Mortgage Bank of Nigeria (FMBN). 

It is also an accredited PMB for the NHF on lending facilities. Meaning you can walk into any of their branch offices, obtain the mortgage form and start processing your loans (as long as you meet the criteria).

• They offer different mortgage and investment products.
• Advisory services to Corporate Organisations and individuals to empower them to access housing finance.
• They also facilitate the provision of Real Estate and Mortgage related services and respond to their needs.

You can visit their headquarters at 23 Karimu Kotun street, Victoria Island, Lagos.

3. Platinum Mortgage Bank (National)

This bank was Incorporated in 1992 with the Corporate Affairs Commission (CAC). They provide Savings, Loans, and Home Ownership Services. They are licensed by the CBN and FMBN to provide Mortgage Banking Services (MBS) to Nigerians. 

Formerly known as Platinum Home Investment and Mortgage limited. PMB limited was recapitalized into a formidable PMI backed by innovative products, services, and professional services.

4. Infinity Trust Mortgage Bank PLC. (National)

One of the leading and most capitalized PMBs in Nigeria. It has financed over 20 modern estates in Nigeria. The bank has maintained an unbroken record in terms of consistency and profitability.

5. AG Homes Savings and Loans Limited (State-owned)

Offers housing and real estate loans for both indigenes and non-indigenes of the state.

Integrated on the 5th of May 1993. You can visit their headquarters at 96 Opebi RD, Maryland Ikeja. Lagos.

6. Akwa Savings and Loans Limited (State-owned)

Integrated on 25th of May, 1993. They offer housing and real estate loans for indigenes and non-indigenes.

Their headquarters is at Plot 1, Block 1, Federal Housing Estate, Abak RD Uyo.

Akwa-Ibom state.

7. Trustbond Mortgage Bank 

A good mortgage bank based in Lagos State. Established in 2005. They offer housing and real estate loans with branches in many states within Nigeria.

They have a large capital base of 5 billion and are capable of offering loans to groups.

Reasons For Acquiring Loans 

Let’s take a look at the various good reasons why one might be in need of loans. Below are 10 reasonable reasons why an individual might be in need of a loan.

1. High Rents 

2. Alternative to payday loan

3. Home remodeling

4. Moving costs

5. Emergency expenses

6. Large purchases

7. Business development

8. Wedding expenses

9. Debt consolidation

10. Medical / Health issues

Disadvantages Of Obtaining Primary Mortgage Loans 

Mortgage Interest rates in Nigeria are considered one of the highest in the world. When dealing with commercial banks the interest rates are between 21%-27% and 6%-9% when borrowing from the NHF. 

Unlike other countries, for example, the USA (3.67%), the UK (2.63%), Japan (0.65%), and South Africa (8%). This means there is a very high monthly interest payment for Nigerians.

Frequently Asked Questions

Below We Gathered Popular Questions About Mortgage Banks And Answered Them For You.

Summary

The housing deficit in Nigeria is wide. The ratio of people renting homes is higher than the ratio of homeowners. Sourcing for funding options like mortgages through the mortgage bank of Nigeria has helped to reduce the gap.