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Land Loans 101: Understanding the Basics and Finding the Right Lender

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Land loans

It can be challenging to consider taking out a loan for land purchase, but owning a plot with the right information and patience is achievable. Banks in Nigeria offer land acquisition loans to citizens, making owning land easier.

The lending process can be more straightforward by understanding the required documents and criteria that lenders evaluate and tracking potential fees associated with such a loan. Equipping yourself with this knowledge beforehand reduces stress and makes taking those important steps toward owning land or property easier.

What is a Land Loan

A land loan, also known as a property loan or plot loan, is a financial instrument used for purchasing raw land or developing it further. These loans are available from banks, investors, and other financial institutions. The amount requested, the purpose of the loan and the repayment period are all essential criteria that lenders consider before granting any land acquisition loan.

Potential borrowers must know the appraised value of the plot to use its collateral value as security against repaying the loan-issuing entity. A better understanding of these requirements empowers borrowers to make an informed decision when investing in real estate or property development while having access to the funds they need to expand their reach. 

In addition, you must be aware of potential fees associated with the taking-out process, such as closing costs or origination fees that may need to be paid upfront. With awareness surrounding procedures and processes of getting a land loan in Nigeria, you can successfully obtain one that can put you on the way towards owning your desired plot of land.

The Top Financial Organizations That Offer Land Loans for Your Dream Property

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Some financial Organisations in Nigeria offer land loans to meet the various needs of customers, ranging from equity loans and improved land loans to direct loans and operating loans. They include:

Credit unions/Cooperative Organizations

A credit union is a great option for those seeking land loans. Depending on the purpose of the loan, such entities can provide options to meet the customer’s needs and lower interest rates than traditional banks. These financial institutions offer seller financing, family living expenses, equity and direct land loans designed for family farms.

Commercial Banks

For business owners and public organizations, commercial banks offer land acquisition loans specifically designed for their needs. Some of the commercial banks are:

  • Zenith Bank with its Land Acquisition Loan Scheme
  • Access bank with its Property Development and Investment Loan
  • Guaranty Trust Bank with its Property Finance loan scheme.
  • United Bank of Africa with its UBA Land Loans program

Other banks include:

  • Union Bank
  • Unity Bank
  • Fidelity Bank
  • First City Monument Bank (FCMB)

Government Financial Institutions

Some government banks, such as the Nigerian Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL), Bank of Agriculture, and Bank of Industry, provide land loan services such as loans for agricultural purposes, financing of agricultural value chains, and mortgage or refinancing of existing loans.

Types of Land Loan

When applying for a loan, it is important to understand the various types of land loans available in Nigeria. They include:

Equity Loans

These are offered by lenders who take ownership of the property while providing financing to pay off existing debts.

Improved Land Loans

These loans are offered to individuals looking to develop a plot of land or build a house or other structures.

Direct Loans

Banks and other financial institutions give these without requiring collateral to secure the loan.

Operating Loan

This type of loan is designed for business owners who need funds to acquire land and build factories or offices. It is important to compare the various lenders before deciding as this helps to find the most competitive interest rates and fees offered by the different banks.

Land acquisition loans

It allows customers to purchase or develop a plot of land with ease and convenience that allows them to take ownership.

Documentation Required for a Land Loan in Nigeria

When applying for a land loan, certain documents are needed. These include:

Proof of Income

It includes income tax returns, pay slips, and bank statements

Land Title/Deeds

Before applying for a land loan,  some applicants who own land properties must present these documents. Lenders will ask for the land to be used as collateral to expedite the loan approval process, which assures them that you will repay the borrowed funds.

It is important to confirm that the title and ownership of the property are legitimate and belong to the applicant.


A good credit score is essential when applying for a loan; it ensures lenders can trust that you will make repayment on time. 

Appraisal Report

It is necessary to evaluate the value of the land in question; this helps lenders determine whether the security offered is sufficient for granting the loan.

Identification Documents

These are necessary to prove the identity of the applicant. It includes a valid government-issued identification card, such as a driver’s license or international passport.

Loan Amount and Purpose

The amount requested and the purpose of the loan are also important in applying for a land loan.

Title Deeds and Other Documentation

The Certificate of Occupancy( C of O)

A Certificate of Occupancy (CO) is a legal document verifying that a building or space meets all local and state laws and building codes. The CO certifies that the structure is suitable for use and occupancy, making it essential when purchasing a home or business property. It assures the lender that you own the property.

Survey Plan or Receipt

A survey plan is a technical drawing of a piece of land that shows the exact measurements and boundaries. It helps to identify where the property or land lies relating to its neighbours and any specific features it may contain, such as rivers, roads, buildings, or fences.

Deed of Assignment

A Deed of Assignment is a legal document that transfers the rights and obligations of an existing loan agreement from one party to another. This document is commonly used when refinancing or restructuring a loan, as it assigns the original loan agreement to the new lender so they can take over the rights and responsibilities under that agreement.

The deed also protects the original lender in the event of default as it binds the new lender to any remaining balances owed. In Inland loan agreements, a deed of assignment ensures that all rights and obligations associated with the plot are transferred to the new lender. This document is essential for obtaining a land loan in Nigeria.

Comparing Bank Loan Interest Rates Across Different Lenders

When applying for a loan, it is important to compare the interest rate of different banks. It helps to determine which lender offers the most competitive and favourable terms. Different banks offer different rates for land loans depending on factors such as creditworthiness and the repayment period.

For example, Access Bank’s mortgage advantage loan comes with a higher loan amount of up to N500 million for individuals and N5 billion for corporates and a longer loan tenure of 30 years on some facilities. The bank also offers up to 250% LTV (loan-to-value ratio) for qualified applicants, with an interest rate of 15-17%.

Zenith Bank’s term loan is a credit facility (short-term, medium, and long-term) available to finance expansion projects and lines of business for a specified tenure. Repayment can be a bullet, balloon, or instalment. Maximum loan amount of N20 million and a repayment period of 10 years. The bank also offers up to 90% LTV with an interest rate.

First City Monument Bank’s (FCMB) mortgage loans provide a wide range of loan options from N5 million to N75 million. The bank also offers up to 85% LTV with an interest rate of 13%. Repayment is in installments that can spread over 4 years

The decision on which lender is the most suitable for you should be based on your requirements and the repayment period, amongst others. With this information, you can compare the rates and terms between Nigerian banks and choose the one that best fits your needs and budget.

What Are the Benefits of Obtaining a Land Loan

Owning a plot of land is an exciting prospect, but considering the cost of acquiring one, it might look discouraging. Therefore, A land loan can be suffix because of the following:

Affordable Interest Rates

Land loans have lower interest rates than traditional mortgages and other loan interest rates. It makes them more affordable for borrowers who need financing for their property or raw land purchases.

Flexible Repayment Options

You can tailor land loan repayment to meet the borrower’s specific needs. This includes fixed-rate loans, adjustable-rate loans, or deferred payment plans that make it easier to pay off the loan over time.

Swift Approval

Land loans require fewer documents than traditional mortgages and other types of real estate financing, which significantly speeds up the approval process. This is especially beneficial for borrowers needing immediate land purchase financing.

No Prepayment Penalties

Most lenders do not impose a prepayment penalty if the borrower pays off the loan early. This allows borrowers to save on interest costs by paying off their loans before the contract ends.

Accessibility to Large Amounts

Land loans often provide access to larger loan amounts than other types of real estate financing. This can be especially beneficial for borrowers needing much money to purchase their desired land or property.

Low Down Payment Requirements

Land loans often require a lower down payment than traditional mortgages and other real estate financing options. It can be beneficial for borrowers who have small amounts of cash at hand.

Frequently Asked Questions

What Documents Are Needed to Get a Land Loan in Nigeria?

Identification cards, income verification, titles and deeds, creditworthiness, repayment ability, and appraisal value of the plot are all typically required when applying for a land loan in Nigeria.

Is There a Prepayment Penalty Associated With Land Loans?

Most lenders do not impose a prepayment penalty if the loan is paid off early. Borrowers can save on interest costs by paying off their loans before the contract ends.

Where Can I Get a Land Loan in Nigeria?

You can also obtain land loans from banks, investors, or other financial institutions. Comparing rates and terms between different lenders is important to ensure you get the best deal possible.

Are There Any Fees Associated With Taking Out a Land Loan?

Yes, closing costs and origination fees are two common types of fees associated with taking out a land loan. It is important to know these charges so borrowers can plan for them when taking out a loan.

Do I Need a Lawyer to Review the Loan Agreement?

Yes, having your lawyer or solicitor review the loan agreement is essential. Your lawyer will be able to advise you on any potential legal issues associated with the loan agreement and ensure that all parties involved are protected.

Final Thought

A land loan is a great way to finance the purchase or development of land. It offers flexible repayment options and lower interest rates than traditional mortgages and other types of real estate financing. 

Before taking out a loan, comparing different lenders to find the most competitive terms, fees, and interest rates is important to get the best deal possible.

Additionally, obtaining legal advice on the loan agreement is important to protect all parties involved. With careful planning and research, a land loan can be an invaluable asset in purchasing property or land.

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