MORTGAGE INSTITUTIONS

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(1)FEDERAL MORTGAGE BANK

This is the apex mortgage institution in Nigeria. It grants loan for the purchase or construction of houses or for the improvement or extension of existing ones. Its loans are usually long-term. It is a Federal Government agency and should be a preferred mortgage institution for the following reasons:

1.It gives long-term credit facilities.

2.The interest rate of the bank is low.

3.It has branches spread all over the country.

Credit- michiganmortgagesolutions.com

(2)HOUSING CORPORATIONS

We have several housing corporations.The most prominent of these statutory corporations is the Federal Housing Authority established by the Federal Housing Authority Act, Cap , LFN 2004, which was set up primarily to execute the National Housing Programme.

At the States level, we have the State Property Development Corporation. In Lagos State, it is called Lagos State Development & Property Corporation (LSDPC) and in Kogi it is the Kogi State Investment and Property Ltd. In most other states, it is called the State Housing Corporation.They provide funds for building and sometimes they build houses and sell to the public by way of mortgage.Advantages of this source of Mortgage Finance

1)There is security of title in respect of property purchased from any of these corporations as there is no problem of demolition.

2)Funds from the corporation attract low rate of interest.

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(3)HOUSING SCHEMES

This is employers’ scheme for the benefit of employees, to enable them (employees) acquire their own houses.The practice is that the employee is required to deposit the title document with the employer until the loan is liquidated.

Advantages

1.Interest rate is low.

2.It is on a long-term repaymentplan.In other words, affordable deductions are made from the employee’s remunerations for several years.

(4)COMMERCIAL BANKS

Commercial banks are in the business of providing credit facilities for financing projects, including housing projects.A lot of mortgages come from commercial banks, especially those involving companies and individuals who want loan advances.Of course, they will be asked to mortgage their properties.Besides, most banks now have subsidiaries that engage solely in mortgage banking. Usually, the customer would have to save 20-40 per cent of the cost of the property while the bank provides the balance. Period of repayment is between 5 and 10 years, depending on the bank, and interest rate is most times very high, as high as 21 per cent. This therefore is not the best option for loan to build or purchase houses; the interest rate is very high and customers are often unable to provide the kind of collateral demanded by the banks.

DISADVANTAGES

1.Interest rate is usually very high.

2.Their loan may me be short-term

(5)PRIVATE PROPERTY DEVELOPERS

Private property developers build houses like the housing corporations and make them available to the public on mortgage basis.A buyer pays deposit and takes possession.Balance is repayable over long period, of course, at an interest rate.

(6)LIFE ENDOWMENT

This is a policy of life insurance and is a form of savings. Insurance companies may lend or guarantee loan from a bank with a collateral mortgage of life policy. In other words, this arrangement is usually on the condition that you maintain a life assurance policy with the insurance company concerned.The borrower assigns the policy to the lender and the notice of this is given to the insurance company.

This is good in that it is a form of savings for the rainy day, for example, to fall back on after retirement. But it t has some demerits: most insurance companies will not do this because it is a long-term loan; and the lender will have to wait for the number of years stated in the policy or where payment is due on the death of the borrower, he will have to wait till he dies.

Source: www.lawrepository.com.ng 

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