Monthly repayment, total interest, and total cost on a naira home loan.
Monthly repayment
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Total interest
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Total repayable
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Worked example
Take a N40,000,000 home loan at 28% a year over 20 years. The monthly rate is 28% divided by 12, which is about 2.333%, and the number of payments is 20 times 12, or 240. Putting those into the repayment formula gives a monthly payment of about N937,029. Over the full 240 months that totals roughly N224,886,860, so the interest paid is about N184,886,860, which is more than four times the amount borrowed. That heavy interest load is typical of Nigerian mortgages, where rates track the Central Bank policy rate plus a lender spread, and it shows why even a one or two point change in the rate moves the monthly cost sharply.
Input or result
Value
Loan amount
N40,000,000
Annual rate
28%
Term
240 months
Monthly repayment
N937,029
Total repayable
N224,886,860
Total interest
N184,886,860
How it is calculated
A repayment mortgage uses the standard annuity formula. The monthly payment equals the loan multiplied by the monthly rate, divided by one minus the quantity one plus the monthly rate raised to the power of the negative number of months. The monthly rate is simply the annual rate divided by twelve, and the number of months is the term in years times twelve. Each payment first covers the interest accrued that month, with the remainder reducing the outstanding balance, so early payments are mostly interest and later ones are mostly principal. Total interest is the sum of every payment less the original loan. Because Nigerian rates are high, lengthening the term lowers the monthly payment but raises the total interest considerably.
Frequently asked questions
How is a mortgage repayment calculated in Nigeria?
A repayment mortgage uses a standard formula: the monthly payment equals the loan times the monthly rate, divided by one minus one plus the monthly rate to the power of minus the number of months. The monthly rate is the annual rate divided by twelve. Nigerian mortgage rates are high, often tracking the Central Bank policy rate plus a lender spread, so even a small change in the rate moves the monthly payment a lot. Total interest is the sum of all payments less the original loan.
Why does the total interest often exceed the original loan in Nigeria?
At high rates such as 25-30 percent, the interest compounding over a 15-20 year term adds up quickly. In the early years, most of each monthly payment covers accrued interest rather than principal, so the balance reduces slowly at first. By the end of a 20-year term at 28 percent, a borrower can pay back more than four times the original loan in total, making the term-length decision very consequential.
What is the effect of shortening the mortgage term?
A shorter term raises each monthly payment but lowers the total interest paid, because the balance is cleared faster and interest has less time to accumulate. For example, cutting a 20-year term to 15 years on the same loan and rate will increase the monthly payment noticeably but can save tens of millions of naira in interest over the life of the loan. Use this calculator to compare both options on the same loan amount and rate.
What types of mortgages are available in Nigeria?
Most Nigerian home loans are offered by commercial banks and the Federal Mortgage Bank of Nigeria. The Federal Mortgage Bank provides lower-rate loans to contributors under the National Housing Fund scheme, while commercial banks offer market-rate mortgages at rates that track the Central Bank of Nigeria policy rate. Terms of 10-20 years are common, and many lenders require the borrower to hold life insurance for the duration of the loan.