Mortgage loan, as we noted last week, is very critical in the life of a man for two reasons; first, mortgage property is a key possession for every man, whether in business or in employment. Secondly, as important as it is in the life of any man, it is not yet a developed product in today’s Nigerian financial sector. Today, we will conclude some of the questions applicants for mortgage loan usually ask.
Are there other charges/costs apart from the interest on the loan?
• Most banks will charge you perfection fees, which are fees paid to the government for the transfer of ownership of title from the original owner to the buyer and you require to pay it upfront before you use the loan.
• Some banks will also put handling charges, and of course VAT
How much must I earn to be able to secure a mortgage loan?
• The practice in most banks is to rate capacity to repay on the basis of the borrower’s annual disposable income. The banks believe that your annual income should be at least 40 per cent of the total loan, that is, you should be earning at least N4m per annum to get a N10m loan.
What is DBR?
• DBR is Debt Burden Ration, which is calculated as the percentage of the borrower’s monthly disposable income, which would be the basis of determining the borrower’s ability to repay and consequently the upper limit amount that can be borrowed.
8. Can I use my housing allowance to service/repay my mortgage loan?
• Yes, whether it is paid monthly or annually and irrespective of the amount, the borrower’s repayment plan is still calculated on a monthly basis and equal monthly instalment amount to the total loan.
9. Can I settle my loan before full maturity?
• Yes, you can but most banks will charge “an early settlement fee” which usually is between three per cent and five per cent of the outstanding loan amount if 60 per cent of the loan is paid earlier than five years.