Although, real estate investment financing in Nigeria comes with a lot of challenges and difficulties due to how the mortgage system is structured and the bureaucracy involved in processing and perfecting required documents for mortgage loan prequalification and approval, from financing to completion down to final sale of the property if its not meant for rental purposes.
In contrast to what we have in Nigeria, the United State for instance, real estate investors have access to several mortgage financing options at very low mortgage interest rate. Investors have the opportunity to choose from the array of mortgage financing options the one that suits and fits into their personal or business needs and objectives. Mortgage financing options available to real estate investors in the United State are Federal Housing Administration, FHA mortgage, Home Path Investment mortgage, 203K FHA, Veteran Affair Loans, Home Equity Loan and line of credit, USDA Rural Development loan, the conventional personal and investment mortgage is also available for investors to take advantage of. Real estate investors can make use of their Individual Retirement Plan Account, can even take out loan against their wholelife insurance policy and there are thousands or millions of hard money lenders willing and able to help finance real estate mortgage. All mortgage financing options mentioned above require only downpayment between 3.5% to 25% with annual mortgage interest of 6% to 8%.
It is sad to know that the same can’t be said about Nigeria because the mortgage system framework and strategies are not structured in a way to allow investors enjoy some of these benefits that comes with investing in real estate as it is abroad.
The current mortgage interest rate is between 18% to 24% across the financial institution in Nigeria. There are very few mortgage financing programs available to real estate investors, one that i can remember is the National Housing Fund that offers mortgage facility of #15m ($47,619) at 6% mortgage interest rate over a period of 30 years with a downpayment of about 30% of the total value of the property. This mortgage facility is of course non functional due to the bureaucracy and burdensome process involved in mortgage prequalification and approval.
The real estate sector in our opinion needs some new and fresh ideas, concepts and input to take it from where it is now to a whole new level as we have in developed countries of the world.
Inspite of all these mortgage financing challenges, real estate investors can still be successful at getting great mortgage deals in financing their real estate property investment provided they do the needful prior to mortgage hunting to enhance the possibility of securing some of the best mortgage deals that will lead to a successful mortgage investing experience in the end.
Prior to mortgage hunt, real estate investors must first look inwardly to get wind of what they truly and really want to achieve with the mortgage investment. Investors must understand that having a stable and sustainable pay job or a regular source of income through a business venture and the ability to pay the required downpayment are some of the vital prequalification and approval requirements they need to fix before setting out to search for a mortgage facility or products. What this implies is that whenever you present your mortgage loan application for prequalification and approval, it will be a breeze and it also makes it easier for lenders to finance your mortgage after reviewing all these financial information.
We strongly advice that investors use reputable mortgage companies experienced in real estate property investing through mortgage financing that can advice on which step to take at every stage of the mortgage financing process because the process of securing a mortgage loan is a bit complex and complicated and getting a great deal seven out of ten depends on who you entrust it on and how the mortgage financing is handled.
Investors must acquaint themselves with the available mortgage products offered by the mortgage company, the mortgage interest rate and the terms of the mortgage facility to enable them make good investment decisions because having a forehand knowledge of the types of mortgage products available to them, the current rate, prequalification and approval requirements and the cost associated with each mortgage product put investors in a favourable position to make sound investment informed decisions on which product suits and fits into their personal or business needs and objectives. This also provides investors with the opportunity of making solid arrangement to secure the current prevailing mortgage interest rate for a specific period through what is called mortgage rate lock.
The next appropriate step to take is to make an accurate estimate analysis of financing your real estate property investment, you can achieve this by considering the total cost of financing, acquiring and rehabbing the property and also cost associated with mortgage expenses and fees which includes origination, underwriting and processing fee.
Finally, if you adhere to this important mortgage financing life changing advice on the best practical approach to securing mortgage loans and also do the needful prior to mortgage hunt, you stand numerous chances of continuosly securing the best mortgage products or deals which will most definitely lead to a successful real estate investing for you, in contrast to the believe that real estate financing in Nigeria is a debt trap that turns assets to liability just after securing the mortgage facility and this has kept many real estate investors in debt because of lack of foresight, inadequate investing strategies, inaccurate estimate analysis, poor understanding of how the mortgage system works, inability to grasp how monthly mortgage principal repayment and interest expense are calculated, the effects and implications all of these might have on the investors.
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