The National Pension Commission (PenCom) has recently approved the use of RSA balance as equity contribution in the acquisition of a residential mortgage. Section 89 (2) of the Pension Reform Act (PRA) 2014 allows RSA holders to apply a percentage of their Retirement Savings Account (RSA) balances as equity contribution for residential mortgage subject to guidelines issued by PenCom.
There have been series of speculations and questions on the specific applicability and practicality of using the RSA balance as equity contribution towards the acquisition of a mortgage facility.
We have decided to streamline this to highlight the basic focal points that will help simplify the issues around the use of the RSA balance for mortgage.
What you should really know
- It’s Only 25% of your balance: For the purpose of using the RSA balance as equity contribution towards the acquisition of mortgage facility, you will only be able to access 25% of your RSA balance. So if you have N10m in your RSA balance, for example, you are entitled to only N2.5m. If the amount is not sufficient for you, you will have to look for the balance elsewhere.
- Voluntary Contributions, Pre-Scheme and NSITF Contributions come in handy: Those eligible RSA holders with additional Voluntary Contributions or those having contributions in NSITF and Pre-Scheme contributions can use them as additions to boost their equity value in addition to the 25% of their RSA balance.
- Artisans and Self-employed are not left out: For the self-employed and artisans in the Micro Pension Plan (MPP), they are also eligible as long as they meet the criteria.
- Only Residential Mortgage is allowed: There are different kinds of mortgage facilities available. However, for the purpose of using the RSA balance for mortgage equity contribution, only Residential Mortgage is allowed. Once it is not a residential mortgage, the application will not be approved.
- Retirees are not eligible to apply: Those who are already retired are not eligible to use their RSA balance for the purpose of RSA for mortgage. Also, those who have less than 3 years to retirement are not eligible. Those eligible are only those who are still active in employment and have more than 3 years to retirement.
- Minimum of 60 months cumulative EE and EA contributions: To be eligible also, the RSA holder must have contributed for at least a minimum of 60 cumulative months which equals 5 years. These contributions MUST contain both employer (EA)and employee (EE) portions. The 60 months will be cumulative meaning that all contributions counted will be for a total of 60 months. This will mean that for those with missing months, it will extend beyond 5 years in their own case.
- Outright Purchase of Property/Land not allowed: The RSA for mortgage cannot be used to acquire landed properties or for outright purchase of a property. It has to be used for obtaining a mortgage facility with a qualified mortgage lender.
- Couples are allowed to pull forces together: Married couples who are qualified can jointly use their RSA balances for the sole purpose of financing a residential mortgage.
You can also read up on how to apply here for those who are qualified to do so.
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