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Home loans and the policy associated with it in Nigeria are various mechanisms by which the Federal government with some private institutions provide loans to individuals or corporate organizations in order to help cushion the rising costs of house acquisition in the country. This the government does by the institution of some agencies who take care of these issues. In this article, we’ll discuss about the National housing fund and its mechanisms. Subsequent articles will do justice to other government and private parastatals through which these loans are achieved.
National Housing Fund
National Housing Fund (NHF) is a Federal Government scheme, which entitles all Nigerians above the age of 21years in paid employment to a low interest, government funded home loans. Members of the scheme contribute 2.5% of their monthly salary to the fund through Federal Mortgage Bank of Nigeria. The maximum amount obtainable under the NHF used to be N5 million but has since been increased to N15 million. The borrowed capital is repayable over a maximum of 30 years at the rate of 6% interest.
Key facts about the NHF
- Who Can Apply
Any Nigerian above the age of 21. They must be a contributor to the National Housing Funds for a period of not less than six months. For individual borrowers, there must be satisfactory evidence of regular flow of income to guarantee loan repayment. This condition is easy to ascertain for applicants in paid/salary employment. For the people in private/trading businesses, there might be need to resort to their bank statements of account.
The loan shall be for the purpose of building, purchasing or renovating residential accommodation. No loan shall be for refinancing.
- How To Apply
Except for institutional borrowers who can apply for the loan directly from Federal Mortgage Bank of Nigeria (FMBN), individuals can only apply through a duly licensed and accredited Primary Mortgage Institution (PMI) of their choice and not directly to the FMBN. Home Loans applications are also to be obtained from the same PMI.
- Security for the Loan
The property (residential accommodation) for which the loan is sought shall serve as security for the loan. The property must have valid title documents (C of O; R of O, Deed of Sublease, Deed of Assignment or Letter of Allocation). The property shall conform to the existing planning laws and regulations and building plans approved by the appropriate authorities. The mortgage property must possess sufficient value to recover the loan. The mortgage property must be insured against hazards. Applicant must accept to take up both “Fire Insurance Policy” and “Mortgage Protection Policy”. The loan shall be secured by first legal mortgage between the applicant and the PMI.
- How Much To Apply For
An individual borrower is entitled to a maximum amount of N15 million. No individual shall be granted a loan in excess of 90% of the cost or value of the property to be mortgaged.
- Institutional Borrowers
Such as real estate developers or construction companies involved in direct housing construction may apply for an NHF loan. Hitherto, beneficiaries were limited to individuals but access has recently been extended to institutional borrowers.
- Other Things To Note
The House Ownership Account has to be operated for a specified period. This varies from one PMI to another. Usually it ranges between 6 – 12 months. It will afford the PMI the opportunity of having a record of applicant’s savings pattern. Repayment figure should not exceed one third (1/3) of total net income on a monthly basis. Except in cases of outright purchase of property, disbursement of the loan is made in instalments and in relation to the stages of development.
- Requirements for accessing an NHF Loan
- Open a savings account with a registered Primary Mortgage Institution (PMI)
- Contribution to the fund for at least six months prior
- Have satisfactory evidence of regular flow of income to guarantee the loan
- Submit photocopies of valid title documents (e.g. C of O)
- Approved survey/site plans
- Approved building plans
- Priced bill of Quantities where applicable
- Valuation report prepared by a firm of registered surveyors and valuers where applicable
- Letter of consent to mortgage to your chosen PMI
- Apply on a prescribed mortgage loan application form
- Offer Letter/Acceptance and Allocation letter (In case of government projects)
- In case of registered self-employed applicant, a copy of Articles and Memorandum of Association and a copy of Certificate of Incorporation as evidence of employment status must be submitted