Are you thinking of moving out of rented accommodation to your own home?
Are you worried about how much money you will likely spend getting a home?
Do you know that you can get a decent home without the fear of becoming broke?
Recent research shows that Nigeria’s homeownership rate (25%) is low when compared to countries like Brazil (74 percent), Kenya (75 percent), South Africa (70 percent), and Indonesia (84 percent). Several factors account for this, chief amongst them is the high cost of buying one.
In addressing this, federal and state governments of Nigeria are providing interventions for low-cost housing in Nigeria. Over the years, different schemes have been put in place to assist individuals looking to become homeowners to achieve their dreams without breaking the bank. Some of these schemes include the Federal Mortgage Bank, LBIC (Lagos Building Investment Company), and LSDPC (Lagos State Development and Property Corporation) amongst several other initiatives.
Also, for working professionals, there is also the option of purchasing a home using your retirement savings fund (RSA). Mortgage financing through your pension contribution can provide a viable option for you if you’re a retiree or an individual with a fixed income and want to own a home. This is what this piece will focus on.
Today, many Nigerians are unaware that they can get a mortgage using 25% of their Pension Funds Account balance. The 2014 Pension Reform Act provides for holders of Retirement Savings Accounts to be able to purchase a house with their retirement funds. As one of the government-backed mortgage programs, this is expressed in the National Pension Commission (PENCOM) approved guidelines on accessing Retirement Savings Account (RSA) balance for payment of equity contributions for residential mortgages by RSA holders.
The big question then is, “How do I get started?”
We’ve simplified the process to help you get a home without having to break the bank.
Step 1: Reach out to your Pension Fund Administrator (PFA) to confirm if you’re eligible. If eligible, you will be given a checklist to guide you and your chosen mortgage lender (usually a financial institution or company that provides loans to individuals or businesses for the purpose of purchasing or refinancing real estate properties).
Also, remember to request for your Retirement Savings Account statement when you reach out to your PFA.
Step 2: Identify your choice of home and obtain an offer letter showing that you can purchase the home.
Step 3: Reach out to a qualified mortgage lender with the endorsed copy of your RSA statement and proceed to apply for a mortgage.
Step 4: Your mortgage lender approves your application and forwards a mortgage offer letter and other documents to your PFA.
Step 5: Send an application to your PFA requesting to use a maximum of 25% of your RSA balance as equity contribution to the mortgage. After this, your PFA forwards your application to PENCOM for approval.
Step 6: Once approved, your PFA notifies the mortgage lender and finalizes the documentation required to remit the approved equity contribution.
Step 7: When this is finalized, your PFA will instruct its Pension Fund Custodian to remit the approved amount to your account with the Mortgage Lender within two working days.
By using your pension fund contribution to secure a mortgage, you can have access to the financial resources you need to purchase a home without having to deplete your savings. However, it is important to carefully consider the terms and conditions of the mortgage and ensure that the repayment schedule is manageable within your budget. Working with a financial advisor, and a reputable mortgage lender can help you navigate the process and make informed decisions. With careful planning and responsible financial management, mortgage financing through pension can help you achieve your dream of homeownership without breaking the bank.
