Mortgage As Security for Loan in Nigeria

Abstract

Mortgages are a common form of security used by banks and other mortgagees when providing loans to mortgagors. It is an agreement between two or more parties where property is conveyed by the mortgagor to the mortgagee for a grant of loan and there is an undertaking by the mortgagee to re-convey once the loan has been repaid. By taking out a mortgage, the mortgagor pledges his property as collateral for the loan, giving the mortgagee a legal right to sell the property in the event that the mortgagor’s defaults on the loan. This reduces the risk for mortgagees and allows them to offer loans at lower interest rates compared to unsecured loans. The study examines the challenges of utilising mortgages as security for bank loans such as title issues under the Land Use Act, 1978, multiplicities of laws, cumbersome process of registration of mortgage transactions, and insufficient collateral. In Nigeria, the Land Use Act 1978 centralized control of land ownership in the hands of the government, with individuals only able to hold leaseholds on properties while requiring consent of the government before they can deal with their land. In contrast to the UK and United States of America, land ownership is based on the concept of freehold or leaseholds, where individuals can own land outright or lease it for a certain period of time without permission from the government. The registration of mortgage transactions in the UK is centralized while Nigeria has a decentralized system with individual State Land Registries. Nigeria could expand access to financing options for potential mortgagors, and have a sound mortgage practices in promoting financial stability and protecting the interests of the stakeholders. The Land Use Act should be amended; multiple laws regulating mortgages should be scrapped as it leads to confusion and complexity for both mortgagors, and mortgagees.

Keywords: Security, Mortgage, Foreclosure, Power of Sale

DOI: 10.7176/JLPG/149-04

Publication date: July 28^th 2025