This article seeks to let you know in a nutshell few important things before you consider taking out a mortgage.
A mortgage is simply a conveyance of land or assignment of chattel as a security for the repayment of a debt or discharge of other obligation for which it is given, with a provision for redemption on repayment of the loan or discharge of such other obligation.
There are lots of laws guiding mortgages in Nigeria, namely:
- Land Use Act
- Land Instrument Registration Law of the various states
- Conveyancing Act
- Property and Conveyancing Law
- Companies Income Tax Act
- Personal Income Tax Act
- Evidence Act
- Stamp Duties Act
- Illiterates Protection Act/Law
- Land Registration Act
- Case law
- Common law & Principles of equity
These are institutions that help individuals and corporate organizations take out mortgages.
- Federal Mortgage Bank
- Housing Corporations
- Commercial Banks
- Finance Banks
- Insurance Companies
- Private Property Developers
- Government & Employers Housing schemes
- Life Endowments
It is always advisable to work with the Federal Mortgage Bank for the following reasons:
- Long-term loans.
- Low interest rates.
- Has several branches spread across the country; this ensures easy accessibility.
PARTIES TO A MORTGAGE AGREEMENT
A Mortgage Agreement is usually made between two (2) parties;
- The Mortgagor: Who can be described as the borrower i.e. the person who is in need of money and is putting up land or chattel and
- The Mortgagee: Who can be described as the lender i.e the person, group and or institution that lends to the Mortgagor.
Mortgages can come in the following ways:
- Mortgagor borrows money for other purposes, using his or another person’s property to secure the loan
- Mortgagor borrows money to build a house, which is also used to secure the loan
- Mortgagor borrows money and uses another person’s property as security
- Mortgagor borrows money and another person stands as guarantor/surety
STAGES IN A MORTGAGE TRANSACTION
There are different stages in a Mortgage Transaction viz:
- Negotiation of the loan – Here, the Mortgagor and the Mortgagee discuss or negotiate the land or chattel the Mortgagor wants to offer the Mortgagee and agree on the loan to be given and the time period to which the Mortgagor has to repay said loan.
- Investigation of Mortgagor/owner’s title: The Mortgagee will have to exercise due diligence by investigating the Mortgagor’s title to the land or chattel. If the Mortgagee isn’t satisfied that the Mortgagor is the true owner of said land or chattel then the Mortgagee can decide to back out.
- Search Report by Mortgagee’s solicitor: The Mortgagee’s Solicitor will then make further searches at the required channels to be sure that the title and ownership of said land or chattel truly belongs to the Mortgagor.
- Valuation of proposed mortgage property: Upon satisfaction of the above 3, the Mortgagee will then value the said land or chattel or property belonging to the Mortgagor and then decide on the amount to offer based on the valuation of the property.
- Documentation – Preparation of Loan Agreement (at the contract stage), and thereafter, Mortgage Deed (at the completion).
- Execution of the Deed by parties: Both parties will then perform their duties under the Mortgage Deed.
- Perfection: This is done by filing it in the required office. Procedure for perfection a Legal Mortgage in Nigeria.
COVENANTS IN A MORTGAGE
A covenant is an agreement included within the framework of the mortgage. These are the covenants you can find in a mortgage:
- Covenant to repay (Punctual Payment of loan installments & interest)
- Covenant to insure the mortgage property
- Covenant to repair
- Covenant to consolidate
- Covenant to observe and perform the covenants on the headlease
- Non-redemption for a term certain
- Covenant on Power of Attorney & Declaration of Trust
Written by Chuks