National Housing Loan – Frequently Asked Questions

A: AIMS AND OBJECTIVES

1. What are the aims and objectives of the NHF Act No. 3 of 1992?

a) To facilitate the mobilization of funds for the provision of houses for Nigerians at affordable prices
b) To ensure a constant supply of loans to Nigerians for the purpose of building, purchasing and improvement of residential houses.
c) To provide incentives for the capital market to invest in property development such as Mortgage Bonds and Mortgage-Backed Securities for property investments.
d) To encourage the development of specific programs that would ensure effective financing of housing development, in particular, low-cost housing for low-income workers
e) To provide proper policy control over the allocation of resources and funds

Among the other reasons some people buy cash-value life insurance is the potential to borrow money from the policy later on. When you bought your insurance policy, the insurance agent may have touted that you would be borrowing your own money and paying yourself back. Insurance agents and companies may promote loans as an easy way to receive tax-free money from your life insurance policy.

However, policy loans are more complicated than they appear. Policy loans need to be reviewed and monitored. If a policy loan is not monitored, a policy could slowly deteriorate, losing the minimum cash value needed. This can leave you with the unpleasant choice of making substantial loan repayments or having a large phantom income tax gain.

B: ELIGIBILITY AND CONTRIBUTIONS

1. Is participation in the scheme compulsory?

The NHF Act no.3 of 1992 stipulates that a Nigerian earning the minimum national wage and above per annum in either the public or private sector of the economy shall contribute 2.5% of his basic monthly salary to the fund. Though this provision makes it compulsory for Nigerian workers to participate in the scheme, it should be seen as also offering them the opportunity to enjoy the numerous benefit of the scheme.

2. Is there a provision for self-employed individuals to participate?

Yes, the NHF Act also stipulates the deduction of 2.5% from the monthly basic salaries of incomes into the fund.

3. How does one make contributions?

The employer is required to deduct 2.5% from the monthly salaries of workers and remit the same to the Federal Mortgage Bank of Nigeria (FMBN) within one month of the deduction. Self-employed individuals are to pay their contributions directly to the bank’s offices located in all state capitals. All payments are duly receipted.

4. How much is a contributor required to contribute to the NHF?

A participant in the scheme contributes only 2.5% of his /her monthly basic salary or monthly pay to the fund

5. How do I know the status of my contribution to the fund?

The FMBN as manager of the NHF provides annual statements of accounts to contributors to the fund. Individuals also have passbooks, which are updated by their respective employers after every deduction. The passbook is proof of participation and shows the level of contribution to the scheme.

6. What measures are in place to guarantee the safety of my contributions?

1. The individual participation numbers issued to each contributor are to keep track of records even in the event of a change of employment.
2. Contribution records are computerized and statements of accounts are issued to individual contributors periodically.
3. Employers are also maintaining contributor’s records in passbooks.

C: BENEFITS AND LOAN CONDITIONS

1. Who can benefit from the scheme?

The NHF scheme is for Nigerian workers in all sectors of the economy and is particularly targeted for the benefit of medium-income earners like civil servants, doctors, and bankers; low-income earners who cannot afford commercial housing loans e.g.to traders, artisans, commercial drivers, etc

2. How can only 2.5% of my basic salary be sufficient to obtain a sufficient amount as a loan to build a house?

The 2.5% of monthly basic salary contributions qualify you to access the loan. Also, the contributions from a pool of long-term funds from which interested applicants can access housing loans. It is expected that only a fraction of contributors obtain loans at any particular time

3. How does a contributor access the NHF?

A contributor interested in obtaining an NHF loan applies through a duly accredited Primary Mortgage Institution(PMI). The PMI is to package and forward an individual’s application to the FMBN. Applications are therefore not received directly from applicants by FMBN.

4. Is it the Monthly contribution that determines the loan amount?

No. The loan amount is determined by the applicant’s affordability. This entails his/her income level that will enable repayment of the loan. You need the work of a professional to manage it, you might think not but you can end up with higher costs and overreaching your budget. So, borrow money only for essentials and stay within your budget limits.

5. What are the documents required when applying for the loan?

Documents required to process the loan include:
a) Completed application form
b) Photocopy of title documents
c) Current valuation report on the proposed house to buy or bill of quantities for the house to build.
d) 3 years tax clearance certificate
e) Evidence of NHF participation
f) Copy of pay slips for the previous 3 months
g) 10% personal stake (contribution of 10% cost of the house)

6. What is the mode of repayment?

NHF housing loans are repaid in monthly installments from the monthly pay/income of the beneficiary, just like monthly rent. This mode of repayment has the advantages of being both affordable and convenient.

7. Can a contributor access NHF LOAN if the primary Mortgage Institution is not in his/her state?

Yes, A prospective applicant can liaise with the PMI in a neighboring state to process a loan. Also, some PMIs are subsidiaries of banks and the local branch of the bank usually operates a desk on behalf of its subsidiary PMI

8. How long does one need to contribute before enjoying a loan facility?

A contributor becomes eligible to apply for an NHF loan after six (6) months of contributions.

9. Are there restrictions as to where a contributor can build his/her house?

The property can be located anywhere, as long as it is within Nigeria. The applicant must however provide acceptable title documents to the land.

10. How does a low-income earner get the collateral to qualify for the NHF loan?

The only collateral required from the loan beneficiary is the property in question. No other collateral is needed to secure an NHF loan

11. How many times can I get an NHF loan?

A contributor can enjoy the NHF facility only once

12. What are the Maximum loan amount and repayment time for NHF loans?

The maximum amount until now has been 5 Million but the federal Government just increased the amount to 15 Million repayable over a minimum of 30 years at an affordable rate of 6%

13. Can I obtain an NHF loan to purchase a piece of land to build a house?

No. A Prospective applicant who wishes to obtain a loan to build a house is expected to have his/her land as well as acceptable title documents to the land prior to enjoying a loan facility

14. Can one get a loan as an individual to build a house or must you buy from a Government estate or an estate developer?

Yes, you can apply as an individual for an NHF loan to develop land or buy directly from Government sponsored estate or private estate developer.

15. If it is not the monthly contribution that determines the loans amount a contributor is eligible for, how is it then determined?

The loan amount an applicant is eligible for is calculated on the basis that he/she does not utilize more than one-third (1/3) of gross monthly pay to service the loan. A simple formula to calculate this is 1/3 of gross monthly pay x 12 months x number of years for the repayment of the loan.

For example, a 35 yrs old applicant on a monthly salary of N60, 00.00 is interested in building a house estimated to cost N7 Million. He has 25 years to go before clocking 60 years, the loan amount is calculated as follows:

Loan ceiling = (N60,000/3) x 12months x 25years
= N20, 000 x 12 x 25
= N6, 000,000.00 (Less annuity interest factor of 6%)

16. What advantages does an NHF loan have over commercial housing loans?

a) The eligibility requirement is by contributing to the fund for only six months
b) The loan covers up to 90% of the cost of a house and can be up to a maximum of N15 million.
c) Interests on NHF loans are relatively lower than prevailing market rates.
d) Interest rate remains fixed throughout the loan tenor.
e) It offers a long period for repayment of up to 30 years.
f) Loan repayment is on a monthly basis. It is therefore convenient.
g) The property serves as security for the loan and no other collateral is required.
h)It is easily accessible to low and medium-income earners.

D. REFUND OF CONTRIBUTIONS, WITHDRAWAL FROM THE SCHEME, AND SUNDRY ISSUES

1. What are the conditions for withdrawing from the NHF scheme?

The NHF Act provides that refunds would be made to a contributor who has not obtained a housing loan upon:
a) Attainment of 60 years of age
b) Retirement from active service/employment and incapability to continue contributions.
c) Refund is also made to a contributor that has obtained a loan, liquidated the loan, and has attained the age of 60years
d) ‘Refunds are also made to the next-of-kin of deceased contributors.’

2. How long does it take to process a refund of contribution?

Refunds are processed within 2 (two) weeks of application if all required documents are forwarded.

3. What happens to my previous contributions in the event I change jobs?

Contributions are not lost in the event of a change of job or transfer. The affected contributor is expected to submit a duly completed NHF Registration Form (NHF II) to indicate this change. The individual Registration Number, which is a permanent allotment, would be transferred to the new employer to sustain the contributors’ records.

4. Apart from building a house, for what other use is an NHF loan for?

Loans from NHF are available to also make outright purchases, and renovate or expand an existing house. The loan is strictly for residential building

5. Since my employer operates a staff-housing scheme, why do I need to participate in the NHF?

The law mandates all Nigerian workers to contribute to the NHF. The funds also offer an additional housing loan facility to such workers.

6. I have a housing loan from another institution and wish to refinance through the NHF loan to purchase a bigger residential property. Is this allowed?

No. Loans advanced under NHF schemes are not for refinancing.

7. Why is the FMBN not building houses for direct allocation to contributors?

The law establishing the bank does not allow it to build houses. The banks’ role is to provide finance for estate developers, state government housing operations, and individuals to construct houses.

8. In the event of the service of PMI processing my loan application is unsatisfactory, what can I do?

You are advised to change over to another PMI whose service would be more satisfactory.

For further inquiries, please contact

Federal Mortgage Bank of Nigeria
Plot 266 Cadastral AO
Central Business District
PMB 2273 Abuja
Tel: 09-4602101
Email: info@fmbnigeria.org
Website: www.fmbnigeria.org

OR

Any FMB state offices near you