Recently, I was having a long discussion with one of my clients. We talked about several issues ranging from getting a good education abroad, buying a new car instead of the so called Tokunbo (used car) to the recent outbreak of Ebola virus in West Africa, most especially our country, Nigeria.
Although, we both shared different views on these issues, when we talked about the outrageous steady increase of house rent by landowners (landlords), we shared a common ground.
If you reside in Nigeria, majorly primes areas in Lagos, Abuja, Port Harcourt and Calabar, you will notice the steady increase in house rents by these landowners who probably think as long as you have a white collar job, you are the Governor of Central Bank.
This arbitrary increase in house rents has led some people to explore the possibility of renting apartments in the outskirts of the cities, yet these under-developed areas are quickly catching up with the cities.
So, as a smart employee or business owner, it is important that you start planning your way of escape from the fangs of the desperate landowners. These days, it is possible to acquire a piece of land in a remote area outside the busy cities and gradually build it over a period of time. But it is smarter to leverage on mortgage loan while you can.
Mortgage loans, also referred to as mortgage, is when someone (the purchaser) uses a real property to raise money from financial institutions (the lender) to buy the same property. That definition might be a bit confusing. Here is what I mean: Mortgage is simply to get a loan from a bank or mortgage firm to buy a property (whether a rental or home) using the same property and your cash flow as a collateral.
These days, there are hundreds of organisations, financial institutions inclusive, who are offering mortgage services. Even the Federal Government has a mortgage scheme in place that you can leverage on. Some corporations also give their long-term serving staff the opportunity to leverage on this Federal, State or Private Scheme.
Whether you are privileged to work in such organisation or not, you will be smarter if you thinking about finding a good mortgage for yourself so you can ease the burden of paying ridiculous house rent annually.
But when considering a mortgage loan, here is an important criterion—you must have a steady flow of income. This simply means to have a very good job in a well recognised organisation or to own a business that is big enough to cater for a heavy loan.
Also, I always advise those who want to leverage on mortgage loan to open a mortgage account with a mortgage bank, making sure at the end of every month, they are depositing X amount of money into the account. The purpose is simply to plan ahead for the time you will be applying for the loan. It will add up to your minimum down payment, which is usually 30 percent.
However, when choosing a mortgage firm, there are five vital things you must consider.
Firstly, you must consider the interest rate because it may be fixed for the period of the loan or changing, variably, at a certain period of the loan. In a variable situation, the interest rate may increase or decrease over a certain period of the loan, but your best bet is to have a fixed interest rate loan.
Secondly, you should consider the term of payment, which is the number of years after which an amortising loan will be repaid. When it comes to repayment plan of a mortgage loan, the minimum years you can get to pay back is 20.
However, it is important to find out if you will be required to pay any remaining balance at a certain date or it can be extended after you have used up the term of payment.
My advice is that you look for a mortgage firm with flexible plan simply because they truly want you to own a property. Thirdly, you should consider the payment amount and frequency. Know how much you will need to pay per period and the frequency. Be sure to find out that the amount to be paid per period can be increase or decrease so it is convenient for you to repay your loan.
And fourthly, you should bear it in mind that if you default over a period of time; the property can be repossessed or foreclosed by the lenders. Lastly, when considering a mortgage, visit several mortgage firms; thorough read through their terms and conditions, ask series of questions before taking the first step to process your mortgage loan.
Alfred Ade-Ijimakinwa
