Buying a home is usually the most expensive purchase most people make in their lifetimes. In Nigeria, it can be doubly hard because of the state of housing finance in the country. Interest rates are very high, and banks are usually very averse to issuing mortgages.

This is one of the reasons why the Federal Government of Nigeria introduced the National Housing Scheme (NHF).

The NHF scheme is a program initiated by the Federal Government of Nigeria and managed by the Federal Mortgage Bank of Nigeria (FMBN).

In today’s letter, we will be discussing the details of the NHF scheme, how it works and how you can take advantage of it to buy your first home in Nigeria.

NHF or National Housing Fund is a program by the Federal Government of Nigeria that aims to provide affordable housing finance to qualified members of the country’s workforce. Basically, if you have any form of regular income, NHF can help you to acquire your first home.

The NHF is anchored in Act 3 of the 1992 constitution that established the National Housing Fund (NHF). Section 2 of the Act outlines the aims and objectives of the fund. Sections 20, 21, and 22 define the offences and penalties for non-compliance. Act 3 is being amended to bring it in line with new realities and is aimed at strengthening the National Housing Fund.

Where does the NHF funding come from?

• Mandatory contribution of 2.5% of the basic portion of the monthly income of Nigerians earning =N=3000 and above per annum.

• 10% of Commercial and Merchant Banks loans and advances portfolio.

• Insurance Companies are mandated to also invest 20% of non-life and 40% of life funds in the housing sector with 50% of these going directly into the funds.

• Financial contributions of the Federal Government.

Who can Apply for NHF financing?

To be able to apply for NHF financing you have to check all of the following categories;

• Be at least 21 years of age

• Have a source of income whether paid or self-employment

• Be earning at least N3000 per annum

• Be up to date with your 2.5% of basic salary contribution to the fund for at least 6 months

Is contribution to the NHF Compulsory?

If you have a regular source of income the answer is yes and the consequences for not making these contributions can be quite severe.

According to the NHF act, persons who fail to remit contributions to the NHF account can lead to a fine of N5000 or one-year imprisonment.

Employers who fail to make deductions from their employees’ salaries for NHF contributions or fail to remit the money deducted are guilty of an offence and liable to a fine of N50,000. Also, the individual staff of the employer responsible for making a deduction or remit deduction is exposed to a fine of N20,000 or imprisonment for a five-year term or both.

A person who prevents or obstructs deduction or remittance of the contribution is guilty under Sec 20 of the Act, guilty of an offence, and liable to a fine of N5,000 or one-year imprisonment.

Now let’s get to the meat of the matter.

How can the NHF help get you into your first home;

If you qualify based on the categories stated above, you can apply to the NHF at any time and receive funding to either build, buy or renovate your house.

You have to apply through any Primary Mortgage Bank approved by the FMBN. The PMB will be in charge of disbursing the funds and managing the recovery process on behalf of the FMBN. Some PMBs will also expect you to have at least 6 months’ worth of transactions with them too before they start your application process.

How much can you access through the NHF scheme?

The NHF is authorized to provide you with a maximum of 90% of the value of the property you want to buy. This means you must have at least the other 10% of the cost of the property as a down payment. The maximum loan tenor is 30 years however the NHF uses a simple formula to calculate the number of years you are eligible for;

60 — Current Age = Number of years of the loan

The current maximum amount you can access is 15 million Naira. However, the PMB is empowered to determine the amount they can provide to you based on your current age and income level so you don’t become too burdened by the repayments

You can also use the NHF as a portion of a larger loan to enable you to buy a more expensive home.

For example, if there’s a property worth 70 million Naira you would like to purchase.

Let’s break it down

You need to have 25% of that amount upfront which is 17.5 million Naira to access the balance of 52.5 million Naira from a mortgage bank.

Now

The total 17.5 million can be combined from you and the total money you must have saved up with NHF. But it gets better, the NHF can provide 15 million which leaves a balance of only 37.5 million for the mortgage bank to provide.

Since the NHF loan has a very low-interest rate of 7% while the commercial loan has an interest of around 17–25%, you are paying much less overall than you would have paid if you had taken the full loan from the PMB.

Check what you can afford using our affordability calculator here and share your badge.

What happens if I never apply for NHF financing to buy a home?

If you never apply for the NHF financing by the time you turn 60, you can apply for a refund from the FMBN.

The only requirements are for you to

• Have been a regular contributor to the scheme with all documentation showing proof, be at least 60 years, or have put in at least 35 years of service.

• You can also apply for a refund if you are very ill and have a doctor’s report proving this.

• A next of kin or heir can apply to get the money back from the FMBN in the case of loss of life after providing proof. All refunds are provided with a 2% per annum interest rate.

Summary

The NHF is a government intervention to enable people to buy and move into their first homes. The loan has the lowest interest rate on a mortgage in West Africa. Contributing to the NHF is mandatory for every adult Nigerian or resident in Nigeria with a regular source of income and failure to remit contributions to the fund could result in jail time or a fine.

If you never get around to applying for the loan, you can always get a refund of your contributions at a 2% per annum interest rate when you turn 60 or after 35 years of service.

If you want to buy a home in Nigeria, the NHF is your best bet.

By way of illustration;

If you took all the maximum parameters of the loan i.e 15 million Naira for 30 years at 6% interest per annum, you would be paying back 30 thousand Naira a month for 30 years. That is 360,000 Naira per annum.

How much do you currently pay for rent?

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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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