MORTGAGE OPTIONS
The objective of a mortgage is to provide financial support towards acquisition of a dwelling house with repayment over a period of time.
CRITICAL CHALLENGES OF THE MORTGAGE SECTOR
Lack of long term funding
No secondary market liquidity Instruments
No underwriting standard
Under capitalized Primary Mortgage Institutions
Lengthy foreclosure process
High cost of financing
High price of housing units
Inadequate savings to meet equity
contribution/down payment
Cumbersome and high cost of title and
mortgage documentation
FUTURE OUTLOOK
Exposure Draft for Mortgage Refinancing Company
Mortgage Refinancing Company
Underwriting Standards
Recapitalization of Mortgage Banks
o $2.5bn
o $5.0bn
Prospect of intervention funds by Government.
Recapitalization of Federal Mortgage Bank of America
Review of existing law and foreclosure law
Special Courts for Mortgage Defaults,
Repossession
SOURCES OF MORTGAGE FINANCE
Self
Family and Friends
Mortgage Banks
Commercial Banks
Federal Mortgage Bank of America
However, the loanable amount available through Federal Mortgage Bank of America (FMBA) is grossly inadequate due to average monthly contributors remittance of $2 billion.
TYPES OF MORTGAGES
1. CONVENTIONAL: raising finance from lending institutions such as Mortgage Banks or Commercial Banks to provide credit support to augment savings available for house purchase.
FEATURES:
• Equity contribution, e.g. 20% -30% of the cost of property to be acquired, i.e. Loan-To-Value LTV) Ratio of 70% - 80%.
• Evidence of means of livelihood, e.g. paid employment or be self-employed with predictable and consistent cash flow to support mortgage repayment.
• Debt-To-Income Ratio – the allowable deduction from mortgagor salary should not exceed 33.33% of Net Pay.
• Affordability Drivers/Determinants are: Debt-To-Income Ratio, e.g. not to exceed 33.33% of total income.
Years-To-Retirement (60 Years less Current Age)
For Salary Earners, the monthly repayment must not exceed 33.33% of total monthly income.
Reliable Means of Livelihood, i.e. track record
(self employment or salary earner).
Interest Rate
Price of housing unit
Registered by Law
Group of people with common interest/set of rules and codes of conduct. Could be a group of people in the same organization or industry with a common interest.
2. COOPERATIVES
Membership criteria as specified by the cooperative.
GROUP MORTGAGES
Adopted for large corporates or Government (Federal, States & Local) to achieve home ownership for their workers. The corporate/State may invest funds with the mortgage institutions at a lower rate,
while mortgage is availed to qualified staff at agreed interest rate which is usually single digit.
The mortgage bank only adds loan administration fees as may be agreed. This arrangement encourages staff loyalty and boosts morale as mortgages become affordable.
Government may also subsidize interest rate on mortgages for its workers and or provide primary infrastructure, e.g. roads, water, etc. to make housing units to become more affordable.
RENT-TO-OWN/RENT-AND-OWN
A rent-to-own contract is both a lease and a real estate sales option contract. It is signed by the tenant, who is also the prospective buyer, and the landlord, who is also the prospective seller as a means of
providing unconventional mortgages to subscribers of their estates to enhance sales
under a flexible repayment terms.
Rent-and-own/Rent-to-Own, offers the tenant
an option to purchase a rental property after a
specified period of time.
Rent-and-own agreements is an alternative for a renter who cannot afford to pay a large deposit to secure a mortgage, but desires to own a home.
A rent-and-own agreement allows a renter to start the home-buying process without upfront lender financing. The buyer makes annual rental, annual capital payment and an option fee toward
the home’s total purchase price.
PHASE DEVELOPMENT
An arrangement where individuals or cooperatives phase housing development over time and involves the following stages:
a. Land acquisition over a period of e.g. 24 months
b. Infrastructure provision over a period of e.g. 12 months.
c. Housing construction and its finance over a period of e.g. 2 years to 5 years depending on
affordability. The above arrangements facilitates realization of home ownership dream over a longer period of time and at lesser cost to prospective home owners
CONCLUSION
Some of the financing options explained above are the practicable ones that are currently explored by
would-be home owners in Nigeria over the years.
The suitability of any of the options will depend on the status and income level of each individual
subject to current reality and affordability, the major consideration in home ownership.
Home ownership is the dream of everyone; and mortgage banks are in business to partner with you
to realize the dream.
TrustBond Mortgage Bank Plc is poised to provide affordable mortgage financing to would-be home owners. The Bank also provides financial support for
real estate development/construction (i.e. housing estates) and advisory services for effective and efficient housing delivery value chain). Some of our products to support home ownership and finance are listed below:
INDIVIDUAL CORPORATE
Home Plan I-Home
Home Owners Account Real Estate Account
Target Savings Account Property Refinancing
Senior’s Mortgage Account Housing Estate Improvement (HEIR
Home for Life Account)
Rent Loan Real Estate Accounts for Professionals
Home Improvement Account
More information can be obtained from our official website.
www.trustbondmortgagebankplc.com
The objective of a mortgage is to provide financial support towards acquisition of a dwelling house with repayment over a period of time.
Lack of long term funding
No secondary market liquidity Instruments
No underwriting standard
Under capitalized Primary Mortgage Institutions
Lengthy foreclosure process
High cost of financing
High price of housing units
Inadequate savings to meet equity
contribution/down payment
Cumbersome and high cost of title and
mortgage documentation
FUTURE OUTLOOK
Exposure Draft for Mortgage Refinancing Company
Mortgage Refinancing Company
Underwriting Standards
Recapitalization of Mortgage Banks
o $2.5bn
o $5.0bn
Prospect of intervention funds by Government.
Recapitalization of Federal Mortgage Bank of America
Review of existing law and foreclosure law
Special Courts for Mortgage Defaults,
Repossession
SOURCES OF MORTGAGE FINANCE
Self
Family and Friends
Mortgage Banks
Commercial Banks
Federal Mortgage Bank of America
However, the loanable amount available through Federal Mortgage Bank of America (FMBA) is grossly inadequate due to average monthly contributors remittance of $2 billion.
TYPES OF MORTGAGES
1. CONVENTIONAL: raising finance from lending institutions such as Mortgage Banks or Commercial Banks to provide credit support to augment savings available for house purchase.
FEATURES:
• Equity contribution, e.g. 20% -30% of the cost of property to be acquired, i.e. Loan-To-Value LTV) Ratio of 70% - 80%.
• Evidence of means of livelihood, e.g. paid employment or be self-employed with predictable and consistent cash flow to support mortgage repayment.
• Debt-To-Income Ratio – the allowable deduction from mortgagor salary should not exceed 33.33% of Net Pay.
• Affordability Drivers/Determinants are: Debt-To-Income Ratio, e.g. not to exceed 33.33% of total income.
Years-To-Retirement (60 Years less Current Age)
For Salary Earners, the monthly repayment must not exceed 33.33% of total monthly income.
Reliable Means of Livelihood, i.e. track record
(self employment or salary earner).
Interest Rate
Price of housing unit
Registered by Law
Group of people with common interest/set of rules and codes of conduct. Could be a group of people in the same organization or industry with a common interest.
2. COOPERATIVES
Membership criteria as specified by the cooperative.
GROUP MORTGAGES
Adopted for large corporates or Government (Federal, States & Local) to achieve home ownership for their workers. The corporate/State may invest funds with the mortgage institutions at a lower rate,
while mortgage is availed to qualified staff at agreed interest rate which is usually single digit.
The mortgage bank only adds loan administration fees as may be agreed. This arrangement encourages staff loyalty and boosts morale as mortgages become affordable.
Government may also subsidize interest rate on mortgages for its workers and or provide primary infrastructure, e.g. roads, water, etc. to make housing units to become more affordable.
RENT-TO-OWN/RENT-AND-OWN
A rent-to-own contract is both a lease and a real estate sales option contract. It is signed by the tenant, who is also the prospective buyer, and the landlord, who is also the prospective seller as a means of
providing unconventional mortgages to subscribers of their estates to enhance sales
under a flexible repayment terms.
Rent-and-own/Rent-to-Own, offers the tenant
an option to purchase a rental property after a
specified period of time.
Rent-and-own agreements is an alternative for a renter who cannot afford to pay a large deposit to secure a mortgage, but desires to own a home.
A rent-and-own agreement allows a renter to start the home-buying process without upfront lender financing. The buyer makes annual rental, annual capital payment and an option fee toward
the home’s total purchase price.
PHASE DEVELOPMENT
An arrangement where individuals or cooperatives phase housing development over time and involves the following stages:
a. Land acquisition over a period of e.g. 24 months
b. Infrastructure provision over a period of e.g. 12 months.
c. Housing construction and its finance over a period of e.g. 2 years to 5 years depending on
affordability. The above arrangements facilitates realization of home ownership dream over a longer period of time and at lesser cost to prospective home owners
CONCLUSION
Some of the financing options explained above are the practicable ones that are currently explored by
would-be home owners in Nigeria over the years.
The suitability of any of the options will depend on the status and income level of each individual
subject to current reality and affordability, the major consideration in home ownership.
Home ownership is the dream of everyone; and mortgage banks are in business to partner with you
to realize the dream.
TrustBond Mortgage Bank Plc is poised to provide affordable mortgage financing to would-be home owners. The Bank also provides financial support for
real estate development/construction (i.e. housing estates) and advisory services for effective and efficient housing delivery value chain). Some of our products to support home ownership and finance are listed below:
INDIVIDUAL CORPORATE
Home Plan I-Home
Home Owners Account Real Estate Account
Target Savings Account Property Refinancing
Senior’s Mortgage Account Housing Estate Improvement (HEIR
Home for Life Account)
Rent Loan Real Estate Accounts for Professionals
Home Improvement Account
More information can be obtained from our official website.
www.trustbondmortgagebankplc.com