One major misconception about buying a home is that you either pay for it yourself or get a mortgage. However, over time, the housing and real estate industry have come up with different kinds of innovative housing finance options that you can access based on your interest, your needs and your financial situation.

Let’s talk about a few of them and how you can qualify for them.

Mortgages

This is the main and easiest way you can buy a home. By definition, a mortgage is any loan you get to buy a home, however, nowadays the word mortgage tends to refer specifically to a long-term (20 years and above) loan you take to buy a home.

You are expected to make monthly payments that cover both the principal and interest. It is however the most difficult form of financing to qualify for.

Here are some financial institutions that offer mortgages;

1. Federal Mortgage Bank of Nigeria (FMBN)

2. Abbey Mortgage Bank PLC

3. LBIC Mortgage Bankers PLC

4. Aso Savings and Loans PLC

To qualify for a mortgage, you need to prove 2 main things, an ability and a willingness to pay back.

To determine these, the bank will require you to provide the following documents.

1. Your payslip over the last 6 months

2. Your credit profile showing your comprehensive financial history

3. Proof that you can meet up with your monthly payments

4. Documents proving the validity of the property and showing it is free of all encumbrances

Depending on the financial institution you are applying for a mortgage from, you might also be required to provide more information and documents. However, they will all fall into the categories listed above.

Rent-To-Own Schemes

A growing popular housing finance option is Rent-to-own schemes or RTO as they are popularly known.

There are 2 main types of RTO schemes;

Lease Option

Lease Purchase

Lease Option

In this instance, you rent a home for a certain amount of time, with the option to buy it before the lease expires. The agreement consists of two parts: a standard lease agreement and an option to buy. At the end of the standard lease period, you can either execute your option to buy or walk away.

This option is good for when you aren’t 100% sure about the home but need some time to improve your financial situation before you are ready to buy a home.

Lease Purchase

You rent the home, while your monthly payments are split into 2 portions. 1 portion is applied as your regular rent while the rest is taken as a payment towards ownership of the home.

For example, if your rent is N35,000 monthly, N20,000 can be considered your actual rent while N15,000 is applied towards your payment for the home.

With this option, you are considered an owner of the home from day 1, so you cannot easily walk away from it.

The details of RTO schemes offered by different organizations might differ, but it's important to understand that in an RTO scheme, you are essentially deferring the option to pay for the home while you keep paying your monthly rent.

Some organizations that offer RTO schemes are;

1. Abbey Mortgage Bank

2. Federal Mortgage Bank of Nigeria

3. Mixta Africa

Developer Financing (Payment plans)

This is the most common type of housing finance option available in Nigeria. The builder of the home gives you the option to spread your payments over 12–24 months. Usually, you can only move in after paying about 70% of the cost of the home.

It’s very common because there is almost no barrier to qualifying for this housing finance option. All you need is to have the down payment which is usually around 30% of the total cost of the home.

The interest rate is also very low and ranges between 5–20% depending on how long you spread the payment.

Here are some developers who offer reasonable payment plans for their properties;

1. Adron Homes

2. Revolution Plus

3. Landwey

4. Mixta Africa

Deposit Free Purchase

This is a form of housing finance where you can buy a home without making any payment including the downpayment.

Here’s how it works;

You find a home you want to buy and approach a financing institution, they will review your finances and if you meet their criteria, they provide you with the downpayment. With that down payment, you can access a mortgage from a traditional mortgage institution.

The financing institution then becomes like an investor in your property and benefits from the appreciation of the property along with you.

Co-operative Home Financing

One very common way to finance your home is to join a cooperative. Co-operatives will help you pool your finances with like-minded members, this increases your purchasing power and also enables you to negotiate better terms with mortgage lenders and property developers.

The co-operative could also help with a down payment program where members can access some loans from the co-operative to augment their available finances.

Co-operatives can also provide home builder loans which you can use to access deals from building material vendors.

So there you have it, 5 different types of housing finance you can use to build your first home and how you can go about accessing them.

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From saving towards your downpayment, registering for NHF, and accessing other forms of housing finance tailored to your income, we make it simple for you to move into your own home.

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