Are you a contributor under the Contributory Pension Scheme (CPS) and a retirement Savings Account (RSA) holder?
If your answer is yes, then you may soon be able to access up to 25 per cent of your RSA balance and utilise as equity contribution for a residential mortgage loan.
Twenthy-five per cent of your RSA balance will enable you to access a mortgage loan of between N1.5 million and N50 million.
This was contained in the draft guidelines on withdrawals from Retirement Savings Account (RSA) towards Equity Contribution for Payment of Residential Mortgage released to the public by the National Pension Commission (PenCom).
Section 89 (2) of the Pension Reform Act (PRA) 2014 provides that a Pension Fund Administrator (PFA) may, subject to guidelines issued by the Commission, apply a percentage of pension fund assets in the retirement savings account towards payment of equity contribution for payment of residential mortgage by a holder of Retirement Savings Account (RSA).
Pursuant to the referenced Section 89(2), these guidelines provide the framework for its implementation. It seek to provide the operational modalities for PFAs in determining the eligibility requirements, procedures and documentation required to enable RSA contributors to access and utilize part of their RSA balances towards equity contribution in respect of first home ownership mortgages.
Meanwhile, a RSA holder shall access a portion of the RSA balance as equity contribution for residential mortgage, only once in a lifetime and may not be entitled to a lump sum payment at retirement.
The guideline however favors insurance operators as it requires that the property to be purchased by a RSA shall have comprehensive insurance policy in the name of the borrower, to cover the replacement or reinstatement cost of the property. The insurance policy must note the RSA Fund as one of the first loss payees, to cover the equity contribution released by the PFA.
The general principles in the guideline to access RSA Balance reads: “All applications by RSA holders to access and utilise a percentage of their RSA balances as equity contribution for mortgage loans shall be approved by the Commission.
“A RSA holder shall access a portion of the RSA balance as equity contribution for residential mortgage, only once in a lifetime. He or she shall make a formal application to the PFA requesting for a portion of the RSA balance as equity contribution for a mortgage loan.
“A RSA holder that has utilized a portion of the RSA balance as equity contribution for residential mortgage may not be entitled to a lump sum payment at retirement. An eligible RSA holder shall be allowed to access a maximum of 25 per cent of the RSA balance as equity contribution for a mortgage loan.
“The RSA balance shall be the Value of an Accounting Unit of the Fund (VAUF) of the RSA Fund multiplied by the accounting units held by the RSA holder as at the date the application was received.”
The guideline further reads that in order to qualify to access the RSA balance as equity contribution for a mortgage loan, the RSA holder must be in active employment, either as a salaried employee or self-employed person.
He or she must have been contributing consistently for a minimum of 10 years, prior to the application for drawdown.
“The RSA holder’s Debt to Income ratio shall not exceed 33.33 per cent of his or her net monthly income at the time of applying for the mortgage. The RSA holder’s debt shall be the sum of the monthly mortgage repayments and other personal debt obligations that impact on his monthly income.
“The RSA holder shall provide the required documentation as required under Section 5.0 and, or other additional documentation requested, from time to time.
The guideline also read: “An eligible RSA holder shall use the proceeds of the mortgage loan to purchase either a single-family home or an apartment in a multi-unit building, which must be owner-occupied. The title to the property must have a fully perfected title and free from any encumbrance.
“The property shall have comprehensive insurance policy in the name of the borrower, to cover the replacement or reinstatement cost of the property. The insurance policy must note the RSA Fund as one of the first loss payees, to cover the equity contribution released by the PFA.
“The valuation of the property to be purchased with the mortgage loan shall be carried out by a licensed, independent valuer who is a member in good standing with the Nigerian Institution of Estate Surveyors & Valuers (NIESV) and must carry Professional Indemnity Insurance with an insurance company licensed and in good standing with National Insurance Commission (NAICOM).
“The mortgage loan amount shall be a minimum of N1.5Million and a maximum of N50Million and the tenor shall be for a minimum of five years and a maximum of 20 years.”