The Harsh Reality of Nigeria's Mortgage Market

Every property, house or land, has the potential to attract a mortgage loan that will enable the buyer to pay for and acquire it for whatever purpose he wants to put it into. But for some reasons, they don't have.

Besides policy and regulatory issues, properties can be denied mortgage loan because of the environment in which they are located which explains why only 5 percent of land in Nigeria is under mortgage, while the remaining 95 percent qualifies as dead capital.

 Of all the necessary documents a property should have to qualify it for a mortgage, a survey document from the government is the most critical because it is the document that provides information about the coordinates of where a property is located. 

If a property you want to buy has a survey, but the property is not properly located according to the governments records, there will be a problem. This problem is the reason banks will not underwrite the mortgage for the purchase. 

Additionally, your property will not qualify for a mortgage due if the environment in which it is located is not right. For instance, if a property is located opposite a burial ground, that will make it difficult for people to buy the property..

Similarly, if the property is located opposite a dump site, that will also create issues for both buyers and financiers. 

In Nigeria, buying a property is a no mean feat. It gives the buyer a sense of worth and pride. And because in this part of the world mortgage is not easily accessible, many people buy off their own pockets, that is, from their life savings.

Nigeria's mortgage sector is still tiny in comparison to the country's housing demand. Among the obstacles hindering mortgage services among Nigerian's are: 

High interest rates: A lot of banks charge mortgage rates between 15% and 28% annually, which is costly for a lot of customers. Because of this, most people in the nation find mortgages to be unappealing. 

Shorter tenors and mismatched maturities: Mortgage lending frequently lacks the extremely lengthy maturities (20–30 years) typical in other nations, which increases monthly payments and complicates servicing. 

Risk and economic instability: Lenders and borrowers are at more risk due to the Nigerian economy's increased inflation, currency problems, and regulatory and legal uncertainty.

Requirements for collateral and credit history: 

It is challenging for many prospective borrowers to qualify since they do not have official employment, complete credit records, or a clear title to their property or land. 

Low housing finance culture and preference for incremental building: Rather than taking on long-term debt, many Nigerians would rather build their homes gradually using savings. "Because long-term planning is challenging in Nigeria, long-term loans are essentially nonexistent." 

Insufficient long-term funding for 

The lack of a uniform mortgage legal framework and land and title difficulties have long been problems in Nigeria because land titles are rarely clear. This explains why you occasionally hear of the demolition of entire villages or estates. Lenders are wary due to concerns over land rights, property registration, and mortgage enforcement.

Due to these reasons, mortgage financing is still relatively underutilized and mostly serves higher-income individuals, government employees, and people with solid credit records rather than the general middle class.