Quickly now,
we will be looking at the socialist idea behind the feasibility of long term
mortgages in Nigeria, using the United states of America as a short case study.
Let us note that we will not be going into too many serious details, but simply
exploring the idea and its possibility in a country like Nigeria. Firstly we
must notes for those who are not aware, that there have at different points in
the history of Nigeria, been long term mortgages available to the public, but
the obvious infestation of vested interests did not make it a successful
venture for real estate investors.
A mortgage
is simply a legal agreement where a bank or entity lends money, product or
services at an interest rate, while holding on to an ownership title or deed of
a property or asset, be it a physical or intellectual asset. In general real
estate practice, it is a process by which a bank or authorized real estate
body/society lends money to approved individuals, to make a real estate
property available for sale at a fixed interest, with an option of instalment
payments over a long or short period of time.
A real
estate mortgage is made up of 4 major factors and components, the Principal,
interest, taxes and insurance, the principle is the loan capital, the interest
covers the said loan, taxes are as expected, while the insurance protects the
bank’s personal interests, the said property and occasionally the supposed
homeowner. In the United States, the average mortgage can run from 15-30 years,
with households spending between 12-40% of their monthly income on paying up
the mortgage charges, the monthly payments in turn is used to fund the mortgage
principals, interests, taxes and insurance.
At this
junction we have to note that mortgages are not open to just anyone who is a
citizen, it is only open to those with a good level of something known as a
“credit score”, which is simply an analysis of the risk behind doing business
with a company or individual, do not let me explain further, but let’s just say
as expected, if we were to run an exam on the citizens of our noble country,
the result will obviously be that at least 90% of Nigerians do not have a good
credit score, as having one comes with serious individual discipline and
commitment to following through on legally binding financial agreements, now
you get the point.
Looking at
all these, it is no wonder why venture capitalists and real estate investors
are not so keen on working out a mortgage plan available to Nigerians, but in a
more organized Nigeria, a mortgage is actually possible, a slim chance but
still feasible, the entirety of a real estate mortgage program’s success is
based on two components;
1.
An effective program that careful
analyses the risk behind making it available to an individual, i.e a sort of
credit score related program one has to qualify for.
2.
Proper semi private management and authorized
partnerships with both the government and public representation.
All these
carefully excluding any form of vested interests, if you do not qualify for a
mortgage, you simply do not, and there are no back doors. So looking at it
carefully now, imagine a situation where a middle class income household, with
an annual joint income of let us say 4 million naira at the least, being able
to pay 1.5 million naira annually, to run a 15 year mortgage on a small 3-4
bedroom house, then those that can afford more have better options.
The truth
is real estate mortgages are not for everyone, it is not a charity even though
it is regarded as a socialist idea, but socialism does not run the economy, healthy
capitalism does, may be in the future socialism might. So for you to qualify
for a mortgage anywhere in the world, you have to first get a fixed level of financial
security and credit score, a #200k a monthly salary is not a lot, it is nothing
outside Africa, although it should get you a lease on a small condominium in a
more organized Nigeria.
As a real
estate developer and consultant, the fixed level of financial security in an
organized Nigeria should be set at #350k monthly income for a small household,
whether joint on single earning, and as a careful reminder, entrepreneurship is
not for everyone, do not be deceived, there are many rich salary earners, you
only have to find what works for you and your family, and learn how to invest
your savings if you at any point plan have multiple streams of incomes.
If you are
in need of help or want to make some inquiries, feel free to send a direct
message or put a call through using the cell digits provided, and you will get
direct access to one of our professional consultants.
Thanks for
reading
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