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what you should know about mortgage.


MAny first-time property investors often face the challenge of raising money to finance their real estate investment goals. The first route that many take is to painstakingly save the money required to fund their dream. This is very good but at the same time not always feasible or seriously time-consuming in some instances. While this has made some to abandon their dream, others have used the principle of leverage to source for home loans from financial institutions to achieve their goal. Understanding some basic things about mortgages or home loan will definitely help you if you intend to explore this option.

There are many myths about mortgages and one of such is that they do not exist or are difficult to obtain. Many do not even consider this as an option in view of the opinions expressed by others. A mortgage is a loan given to a person for the purpose of acquiring property or some other agreed purpose that is secured with a property and is expected to be paid back over a period of time. The bank earns money on the amount and also holds the right to sell the property in case there is a default. It is one of the secure means of generating money for banks and even though it may not be common, you can be sure that it will always remain an option if you can meet the conditions.

There are at least three primary sources of mortgages. You can obtain a mortgage from a commercial bank and you can also obtain home loans from companies that are technically called primary mortgage institutions. Most of these companies have ‘mortgage’ or ‘savings and loans’ included in their names while the commercial banks represent home loans from private lenders. Thirdly, we have government mortgage arrangements such as the Federal Mortgage Bank of Nigeria as well as the National Housing Fund scheme. The essence of all these by the government is to have finance available for multitudes of intending homeowners at a competitive rate.

To be eligible for a mortgage loan, you need to speak to any of the providers and ask them for what they really need from you before they can advance you money. Remember that the primary consideration for these lenders is the security of their funds. Many of the banks already have a profile of the person they want to deal with. They consider your place of work and amount of compensation that you earn. They have a preference for employees of multinationals, telecommunication and oil companies. A self-employed person with low turnover may not interest them. This process is called pre-qualification. Start this process early. Start before you actually need the money.

Mortgage providers are usually very particular about property title. You need to focus on properties with Certificate of Occupancy, Land Certificate or registered conveyance. The preference is for certificate of occupancy. If you are considering buying from traditional landowners, it will be a herculean task to get them to fund your purchase. There are also different projects that are financed by the bank that may meet your requirement. If you are buying into a project financed by the mortgage provider, then the process could be fast-tracked at least when it comes to document verification.

When it comes to interest rate on a mortgage, never fully believe whatever you are told until after verification. Interest rates are high and are structured in such a way that you need to be wary before you sign the dotted line. There are lenders that disclose upfront their charges thus making it easier to calculate what it will cost you. Unfortunately, most banks have an array of monthly, quarterly and annual charges that significantly increase your cost of funds and these fees are generally not fully disclosed to the borrower. It is smart to try and understand your obligations in this regard before you go ahead. Compare bank policies and offers before going ahead.

It is important that you know that the payment plan that you will receive from the lender is designed to ma