All about Construction Loans and How to get it in Nigeria

If you’re thinking about building a house or a commercial property in Nigeria,

this blog post is for you.

We’ll cover everything you need to know about construction loans

and how to get them in Nigeria.

Don’t just stop here, continue reading. Bullion Rise Consult has got you covered.

First, let’s talk about what a construction loan is.

A construction loan is a short-term loan used to finance the building of a property.

This is different from a traditional mortgage, which pays for an existing home.

With a construction loan, you get the money to build your project from the ground up.

In Nigeria, there are several types of construction loans you can choose from.

The first type is a Construction-to-Permanent Loan.

This loan lets you finance the construction of your home

and then convert it to a permanent mortgage once the building is complete.

The second type is a Stand-Alone Construction Loan.

This is a separate short-term loan just for the construction period.

After construction, you need to get a new mortgage to pay off the construction loan.

Lastly, there are Renovation Construction Loans.

These loans are perfect for homeowners who want to renovate their existing properties.

Now, you might be wondering why you should consider a construction loan.

There are several benefits. One major benefit is the Flexible Draw Schedule.

You receive funds in stages as then construction progresses.

This helps you manage the project better.

Another benefit is Interest-Only Payments during Construction.

You only pay interest on the amount disbursed until the project is complete.

This can save you money in the short term.

Construction loans also offer Customization.

You can build a home tailored to your specifications. Plus, you have Control over Costs.

You can manage and monitor construction costs more effectively.

Eligibility Criteria for Construction Loans in Nigeria

To get a construction loan in Nigeria, you need to meet certain criteria.

First, you need a Good Credit Score.

A higher credit score increases your chances of approval.

Next, you need a Stable Income. Proof of steady income assures lenders that you can repay the loan.

You will also need a Down Payment.

Typically, this is around 20-30% of the total construction cost.

Additionally, you need a detailed construction plan.

Lenders want to see a comprehensive plan, including project timelines and cost estimates.

Finally, working with an Experienced Builder can improve your chances of loan approval.

Lenders feel more confident when you have a reputable builder on your team.

How to Get a Construction Loan in Nigeria

Step 1: Prepare Your Documents

Before applying, gather all necessary documents.

These include proof of income (like salary slips, bank statements, and tax returns),

a credit report, a detailed construction plan, and builder’s information.

Don’t forget proof of land ownership or a lease agreement.

Step 2: Choose the Right Lender

Research various banks and financial institutions that offer construction loans.

Compare their terms, interest rates, and fees.

Popular options include commercial banks, mortgage banks, and microfinance banks.

Step 3: Submit Your Application

Once you have chosen a lender, submit your loan application.

Make sure all your documents are complete and accurate to avoid delays.

Step 4: Undergo Evaluation and Approval

The lender will review your application and documents. They may request additional

information or clarification. This process can take several weeks.

Step 5: Loan Disbursement

Upon approval, the lender will disburse the loan in stages, known as draws,

based on the progress of the construction.

You will need to provide regular updates and possibly allow inspections to ensure the project is on track.

Here are some tips to help you get approved for a construction loan.

First, Improve Your Credit Score. Pay off outstanding debts and avoid

new credit inquiries before applying. Next, Save for a Larger Down Payment.

The more you can pay upfront, the better your chances of approval.

Also, Choose a Reputable Builder.

A builder with a solid track record can reassure the lender about the project’s viability.

Present a Detailed Construction Plan.

A thorough and realistic plan shows that you are prepared and organized.

Finally, Show Stable Income. Demonstrating consistent income increases your

reliability as a borrower.

Frequently Asked Questions