Mirror Lawyer: How can we make property owning easy in Ghana?
Dear Mirror Lawyer, In many countries facilities exist for the citizens to purchase property through credit facilities spread between 15 and 30 years.
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Through such facilities, people are able to own houses easily and avoid the inconvenience of and hassle in paying rents to landlords and facing ejection from one place to the other.
My observation in Ghana is different. Every property must be paid for in cash before a middle-income earner can own a house.
It seems to me that Ghanaians are magicians for being able to cough out large sums of money at a go to pay for such properties.
My question is: What is militating against developing similar credit facilities to make property owning less burdensome for the people?
Kwamena Bentil, Legon, Accra.
Dear Bentil, The question posed by you refers to a type of credit facility called “Mortgage”. The word mortgage is derived from a French law term used by English lawyers in the middle ages meaning "death pledge", and refers to the ending or dying of a pledge when either the obligation of the borrower is fulfilled or the property is taken and sold because the borrower could not pay back as he had promised.
A mortgage is a loan to buy a home. Your home is collateral i.e. security or guarantee for that loan. Like any loan, interest is charged on the amount you borrow (the principal). Each mortgage payment consists of repayment of the principal, plus interest.
The principal is simply the sum of money you borrowed to buy your home. Interest is what the lender charges you to use the money you borrowed, usually expressed as a percentage called the interest rate.
In addition to the interest rate, the lender could also charge you points and additional loan costs. Principal and interest comprise the bulk of your monthly payments in a process called amortisation, which reduces your debt over a fixed period of time.
With amortisation, your monthly payments largely go toward paying off the interest in the early years, and gradually reduce the principal later on.
If you do not repay the loan or mortgage debt, a legal mechanism is put in place which allows the lender to take possession and sell the secured property, also known as foreclosure or repossession.
In a foreclosure, you will lose your home and you will likely damage your credit rating, affecting your ability to buy a new home in the future.
The lender will typically be a financial institution, such as a bank, credit union or building society, depending on the country concerned, and the loan arrangements can be made either directly or indirectly through intermediaries.
Features of mortgage loans such as the size of the loan, maturity of the loan, interest rate, method of paying off the loan, and other characteristics can vary considerably.
The lender's rights over the secured property take priority over the borrower's other creditors, which means that if the borrower becomes bankrupt or insolvent the other creditors will only be repaid the debts owed to them from a sale of the secured property if the mortgage lender is repaid in full first.
In 2008, Ghana’s Parliament passed the Home Mortgage Finance Act, 2008, Act 770 to govern transactions between financial institutions and their customers for the provision of finance for the construction or purchase of a residential property, the completion of a residential property, extension to or renovation of a residential property, improvement to a residential property for ownership, sale or rental and construction of residential properties for sale or rental or purchase of fixtures and chattels related to residential properties.
The Act provides that where a financial institution grants a loan, security for the loan shall include a mortgage over the property for which the loan is granted and the title deeds duly stamped, registered and deposited with the financial institution also known as the mortgagee.
Under the Act, a person who obtains a mortgage loan shall use it only for the purpose for which the loan was taken.
The law provides that where there is a default for repayment of the mortgage loan, the lender shall issue a demand notice in writing to the borrower requesting for immediate payment of the total outstanding arrears.
Where the borrower fails to make payment after the third successive month, the lender may sue the borrower to realise the security in the mortgaged property or take possession of the mortgaged property peaceably without court proceedings by using the services of the police to evict the mortgagor or other person in possession pursuant to a warrant issued by a court.
Though in the past, such credit facilities were not available unless by a special arrangement with a bank, it is apparent that the law has changed since 2007 and Ghanaians can now take advantage of the law to buy their own properties and pay by monthly installments.
What is the challenge now is public sensitisation and the ability of borrowers to satisfy the financial institutions of their willingness and capability to repay the mortgage debt.
