Mortgage Features & Criteria

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Mortgage Loan Features & Criteria

Currently, in the Nigerian mortgage market as with most other mortgage markets, different lenders have their different strategies, products and loan criteria.

Below are some of the typical loan features and market indicators:

Tenor: 5 to 20yrs (varying from lender to lender, depending on product type, age of customer etc)

Max Loan: Also varies from lender to lender depending on repayment capacity of borrower. While some lenders set a cap e.g. N20m, N50m etc Others leave the max mortgage loan amount subject to borrowers capacity

Fees: Different banks with their different pricing and naming conventions. Some fees are charged during processing of the transactions others charged at disbursement, while others may be charged monthly, quarterly or annually throughout the duration of the loan.

Interest Rate: Varying from lender to lender, typically from the mid teens to the mid twenties, depending on borrower profile, relationship with lender etc

Other Costs: Other charges to the customer which are not necessarily income to the lender are typically Administrative costs such as valuation, legal search and credit search charges. Other costs also include Closing costs which are typically legal perfection fees, insurance charges etc. These also vary between lenders, but typically the higher the “other costs” the lower the interest rate. In other words lenders who charge a lot to do more due diligence such as double valuations full perfection, mandatory insurance etc, often pass on the gains from the implicit reduced risk on to the customer by way of slightly lower interest rate.

Down payment & LTV: Again it varies by lender and depends on borrowers risk profile. Range in the Nigerian mortgage industry is 10% - 35%.

Loan to Value (LTV): is the loan amount as a percentage of the value of the property. By making a down payment, the buyer has bought some equity in the property. Buyer’s equity plus loan amount equals the selling price. Assuming selling price equals open market value of the property then the LTV is the inverse of the down payment or equity contribution. Example 10% contribution equals a 90% LTV.

Age: Max age at maturity of the loan is typically 60yrs, however some lenders go up to 65yrs