What mortgage means
A mortgage is a lender taking your property as security while you keep living in it.
You borrow, the lender registers an interest over the property, and you repay over time. If you stop repaying, the lender can enforce the security, which ultimately means selling the property to recover what is owed.
The borrower is the mortgagor and the lender is the mortgagee, which is worth remembering because the two words look almost identical and appear all over the documents.
How it is used
In Nigeria, mortgages arise in residential purchases, commercial property finance, and as security for business lending where a director or the company pledges land.
The process involves the loan agreement, the mortgage deed creating the security, and then perfection, which includes Governor's consent where the title is statutory, stamping, and registration at the lands registry. A lender who has not perfected has a much weaker position than one who has.
Key features
- Secured on identified property, which the borrower continues to occupy
- Created by a mortgage deed and, for statutory titles, requiring Governor's consent
- Registered at the lands registry so the interest binds third parties
- Gives the lender rights of enforcement on default, including power of sale
- Discharged once the loan is repaid, with the discharge itself registered
How this works in Nigeria
Consent and registration are where Nigerian mortgages are won or lost. A mortgage over land held under a Certificate of Occupancy requires Governor's consent under the Land Use Act, and registration gives notice to the world.
This is also why mortgage lending in Nigeria is slower and more expensive than in many markets. Perfecting security takes months and attracts consent fees, stamp duty and registration fees, and lenders price that in.
Borrowers should also expect personal guarantees alongside the mortgage where a company is borrowing, which puts the directors' own assets behind the debt even though the company structure would otherwise protect them.
Legal mortgage vs equitable mortgage
A legal mortgage is created by deed and, once consent and registration are complete, gives the lender a legal interest in the property and the strongest enforcement position.
An equitable mortgage arises in less formal ways, for example by depositing title documents with the lender with the intention of creating security. It is quicker and cheaper to create, and materially weaker to enforce.
Nigerian lenders often start with an equitable mortgage while perfection is in progress, then upgrade to a legal mortgage once consent comes through. Borrowers should understand which one they have actually given.
Limits and risks
A mortgage does not transfer ownership to the lender. The borrower retains the property subject to the security, and the lender's rights arise on default.
Enforcement is also not instant. Lenders must follow the process the mortgage deed and the law require, and borrowers have protections. That said, a borrower relying on delay rather than repayment is in a poor position, because interest and costs continue to accrue throughout.
Worth knowing
Check whether your mortgage is legal or equitable, and whether consent and registration were completed. Unperfected security causes problems for both sides when the property is later sold.