Do you know that a greater number of Nigerians are struggling to buy a house? This is because house prices have increased by 25 percent especially in major cities in Nigeria.

This is why you should know the financing options to buy a house in Nigeria. This article outlines the top financing options to buy a house in Nigeria. This helps make your dream home a reality.

Financing Options for Buying a House in Nigeria: A Must Know

One of the tips to consider as a first-time home buyer is the financing options available for you. There are several financing options available to individuals. The financing options to buy a house in Nigeria include:

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• Mortgage Financing
• Cooperative financing
• Rent-to-own
• Housing Schemes
• Personal Savings and Investments
• Developer Financing Plans: Real Estate Investment Trusts (REITs)
• Family and Friends
• Crowdfunding
• Private Equity and Venture Capital

 

1. Mortgage Financing

Mortgage loans are one of the commonest financing options to buy a house in Nigeria. A mortgage is a loan designed for property purchases.

The property itself serves as collateral. This means the lender can claim it if the payments are not made.

Banks and mortgage institutions offer these loans, covering up to 80% of the property’s value.

The buyer needs to pay 20% of the property’s cost as a down payment. Repayment periods can last from 2 to 25 years.

The interest rates can either be fixed or variable. Eligibility depends on income, credit score, and having enough for the down payment.

Key Features

• Long repayment period
• Fixed or variable interest rates
• Requires a down payment

2. Cooperative Financing

This is one of the most common types of financing options to buy a house in Nigeria. This option involves a group of people helping each other financially.

Members pool resources to offer loans. This comes with lower interest rates compared to traditional banks.

The repayment terms are flexible. This makes this ideal for informal sector workers or small business owners.

They provide real estate loans for buying land, building on land, developing land, and temporary loans for real estate projects.

To access cooperative financing, you must join a cooperative group. Each group has its own membership rules, but members contribute towards the pool of funds.

Key Features

• Lower interest rates
• Flexible repayment terms
• Accessible to informal sector workers

3. Rent-to-own

Rent-to-own schemes are growing in popularity in Nigeria. This option allows potential buyers to rent a property with the option to purchase it later.

Part of the rent goes towards the down payment or the purchase price.

This option is good for people who can afford rent but don’t have enough for a down payment yet.

To qualify, you need a steady income and a good credit score. Make sure to understand the terms of the lease agreement before committing.

Ask questions if you don’t understand anything.

Key Features 

• Gradual accumulation of down payment
• Flexibility to buy after renting
• Good for people with limited initial funds

4. Government-backed Financing Programs

The Nigerian government offers financing options to buy a house in Nigeria. One key program is the National Housing Fund (NHF). This provides loans for various housing needs.

The NHF requires employees aged 21 and above earning at least ₦3,000 per year to contribute 2.5% of their monthly basic salary. In return, they can access low-interest loans.

The National Mortgage Refinance Company (NMRC) also plays a role in issuing mortgages, especially to first-time buyers.

The Federal Mortgage Bank recently lowered the NHF loan limit from ₦15 million to ₦50 million. This increase aims to give more people access to affordable homes.

Conditions like how much you earn and where you live  must be met in order to get these loans. Mortgage rates are usually between 14% and 20%. Hopefully it will decrease as time goes by.

Key Features

• Low interest rates
• Long repayment periods
• Eligibility based on NHF contributions

 5. Personal Savings and Investments

Some people prefer to save and invest over time to buy a house without taking on debt. This method may take longer.

It also avoids the interest payments associated with loans and mortgages. This option gives you full ownership without the burden of repayments.

Key Features

• No interest payments
• Requires disciplined saving
• Full ownership without debt

6. Developer Financing Plans

Many real estate developers in Nigeria offer financing plans to make buying easier. These plans allow buyers to pay in installments, often with little or no interest.

This option is particularly useful for off-plan purchases. where payments are made as the construction progresses.

Real Estate Investment Trusts (REITs) help investors who want to invest in Nigeria property scenes. These groups gather cash from various people.

They invest in shops and homes that make money, without you having to manage them directly. REITs are easy to buy and sell. This is because they are traded on the Nigerian market by approved brokers.

Key Features

• Installment payments
• Low or zero interest rates
• Ideal for off-plan purchases

8. Private Loans

Private loans come from individuals or private lenders. It offers quicker approval than banks. These loans are flexible. It can be tailored to meet specific project needs.

Private loans are often used to fill funding gaps in property investments. They get approved faster than bank loans. This lets developers jump on good deals quickly.

Sometimes, they allow you to use different things as collateral. This is depending on your financial state.

Key Features

• Faster approval than traditional bank loans
• Flexible terms
• Can use various forms of collateral.

 9. Crowdfunding

Crowdfunding has become a popular way to finance property in Nigeria. It allows multiple people to contribute funds to own real estate projects.

These can be residential or commercial buildings. Crowdfunding makes it possible to invest in real estate with smaller amounts of money.

You don’t need a lot of money to start crowdfunding. It allows you to put your money into many projects.

Key Features

• Allows small investments
• Diversifies risk
• Transparent process

10. Family and Friends

Borrowing money from family and friends is an informal but common way to finance a house purchase.

This method offers flexibility and may not require formal agreements or interest payments. However, it’s important to set clear terms to avoid misunderstandings.

Key Features

• Flexible terms
• No formal requirements
• Potential for interest-free loans

Final Thoughts on Financing Options to Buy a House in Nigeria

Financing options are one of the things to consider when buying a land or house. Nigeria’s real estate market offers diverse financing options for homebuyers and investors.

However, each option comes with its own benefits and risks. It is important to choose what aligns with your goals.

Consider your money situation, risk comfort, and how much you know the market. Understanding different financing options, what you need for them, and their risks will guide your choice.