A mortgage is basically a loan and operates the same way a loan operates. They are similar in that they both come from a lending organization like a bank; they however differ in that while a loan can be used for different purposes, a mortgage is used to purchase a home or property.

Mortgages come with a limit. You may not get a mortgage that completely covers the cost of your home or property but many mortgages cover about 80% of the cost.

Why are Mortgages Important?

As at 2011, Nigeria was the largest exporter of oil globally. Even with this, 80% of Nigerians live in deplorable conditions, in informal housing without access to potable water and other public infrastructures. The housing deficit at that time was 17 million units.

Nigeria’s rate of home ownership is one of the lowest in Africa at 25%. According to the Managing Director of the Federal Mortgage Bank, Nigeria’s homeownership rate is much lower than countries like Singapore (90%), Indonesia (84%), Kenya (73%), USA (70%), Benin Republic (63%) and South Africa (56%).

Types of Mortgages Based on Interest

1.      Fixed-Rate Mortgages

Fixed rate mortgages, just as the name implies are mortgages with fixed interest rates. The same interest that applies at the start date of the mortgage will apply till the end of the mortgage period. Fixed rate mortgages are structured to favor people who spread paying their mortgage over a longer time frame. If you’re also very big on planning, fixed rate mortgage may be your best bet. Fixed rate mortgage allows a steady deduction, this way you don’t have to go over your monthly budgetary allocation. This way you’re also protected from adverse market changes and fluctuation in the economic situation.

2. Adjustable-Rate Mortgages

Adjustable rate mortgages are the direct opposite of fixed rate mortgages. Their interests vary and change after sometime. They are subject to changes influenced by the market and economic situations. This form of mortgage usually has a low starting deposit. This makes it a perfect option for individuals who are looking at getting an improved pay in a short time. The downside is that with the constantly changing interest rates, it becomes difficult to work with a monthly budget.

Types of Mortgage according to security

  1. Legal Mortgage

The legal mortgage is the legal seal kind of mortgage. It is not only a comprehensive form of mortgage, it is also very secure. It ensures that the mortgagor from dealing with the mortgaged assets while it is subject to the mortgage.

2. Equitable mortgage

An equitable mortgage involves the transfer of the borrower’s beneficial interest in an asset to the lender by way of security for the performance of particular obligations, on the express or implied condition that such beneficial interest will be retransferred when the secured obligations are discharged. As only the beneficial interest in an asset is transferred, an equitable (rather than a legal) security interest is created.

The Mortgage Securing Process

1.      Work on getting your deposit read. You need to have a deposit to secure the house and kick start the process.

2.      Look for house buying schemes. Real Estate companies offer various schemes, you want to make sure the real estate company works well with mortgages. There are various schemes in Nigeria that can help you buy a home. .

3.      Start looking at properties.

4.      Obtain a mortgage loan.

In conclusion, mortgages are a great way to work on getting your own house; however, Mortgages are financially tasking and are under strict contract monitoring. Before beginning a mortgage, you want to be sure of your decision and are convinced of the financial implications.

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