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Elements to Consider When Looking for a Property Loan

UAE is a dream place for people to settle in. After getting employed, the first thing a person can think about is to buy a house. It is the priority of any individual. Buying a house by making full payment can be a difficult task. People usually seek property loans. You can get properties by cash payments, but property loans are a more flexible option.

Do thorough research before making home financing decisions. You should be aware of all the methods, ways, and profit loss situations. Search for the available option. Seek lenders and do a review on taking loans through banks or brokers.

Search for credit scores and credit history. Look for the rates of interest. Check the market trends. You should be aware of repayment tenure and how you can shift lenders. The most important thing is to maintain your financial situation, stability of employment, and dependents of that employment. All these matters are taken into consideration when a loan is applied for or given. Banks also need to assess the risk factor before issuing you a loan.

There are some elements that you need to focus on in detail while applying for home financing.

Home financing:

Home financing or home mortgage loans is the amount borrowed directly from banks or indirectly from brokers to buy a home or property. This is usually done when the buyer does not have the full amount to buy a property.

Eligibility for Property Loan:

You need to be aware of the conditions set by the UAE government for property purchase and sale decisions. There are limitations over who can and cannot get a property loan.

For people who are employed and get monthly salaries, the age should be between 21 to 65 years. People who have a monthly income of AED 12K come under this category.

For self-employed people, the age limit is of 75 years. People who have a monthly income of AED 25k fit under this category.

 You must have to spend a period of six months on your current job. And for businesspersons, your business should be in work for 2 years. You should have a clean credit history and a credit card.

Types of Property Loans by Interest Rates:

Property loans vary based on the changing interest rates. It is the main factor in deciding which type of home loan suits you the most. Each type offers different interest rates and payment styles.

A fixed-rate mortgage: 

It offers property loans on fixed interest rates. You agree on a fixed rate before the loan period starts. This is a safer way. You will not be tensed about the upcoming fluxes in interest rates. You will pay the same amount in each installment.

Variable-rate mortgage: 

In this type, the interest rates will keep changing with the variation in market trends. It is mostly not a cost-effective option. As you will not be clear about what percentage you have to pay with each installment. If you are too much financially stable to bear the changing rates, you can opt for this type.

Discount Rate mortgage: 

It gives you a discount on the interest rates for a fixed period. You need to critically analyze this option. When the discount period will end you need to think about the amount of interest rate you will have to pay.

Capped rate mortgage: 

In this type, the interest rate limit is capped or fixed. However, the percentage can vary in the range. The market trends will not affect the rate as they cannot exceed the capped limit.

Remortgage: 

It comes into function when you take another loan within the previously existing loan period. It then adds on the additional loan and the interest rate is set again.

Offset Mortgage: 

It connects your loan and property mortgage with your bank accounts and savings. Your interest amount gets reduced when you get some profit or extra money in your account. Interest rates can vary from 2% to 5% on home financing.

If you are buying a property for investment purposes, the banks or lenders take it as a risk factor and give higher down payments and interest rates.

Down payment for Property Loans:

To get a property loan in UAE, you have to make initial deposits or down payments. People need to pay an initial deposit of 20% of the actual amount of the property if it is under AED 5 million. Expats pay a 20% down payment while the UAE natives pay a 15% initial deposit amount. For a property above AED 5 million, this percentage can increase to 30% – 40% depending on the property you want to purchase.

Apart from the down payment, the upfront cost also includes the transfer fee (4%), the Valuation fee (AED 2500-3000), Mortgage registration fee (0.25%), and real estate commission (variable).

Do check the repayment value, that should not be more than 50% of your income.

Mortgage Providers:

You can shift between mortgage providers. You can convince your lender or bank to give you more profitable plans or you can shift your mortgage provider by paying a fine of AED 10k. Also you have to be careful and critically make your decisions by analyzing all the included factors.

Documents Required:

Whenever you make any purchase, you need certain documents to verify your purchase process. You will need:

  • Copy of  your Emirates ID.
  • Copy of your passport and visa.
  • Bank payments and pay slips for the past six months.
  • A salary certificate or trading license.
  • Dewa bill or tenancy contract.
  • Credit card statements of latest transactions.
  • Documents to verify mortgage affordability.

Process:

After you have a clear idea of all the basic elements you can apply for the loan. Select a bank or broker and the mortgage type that suits you. You can then get a mortgage approval letter. Search for units and deals and select the property you want to purchase. Pay the deposit and confirm the purchase and completion date.

Banks:

Some banks offer home mortgage loans at good rates.

  • First Abu Dhabi Banke offers home loans at the rate of 3.99% for up to 1 year. It demands a down payment of 20%.
  • CBI Commercial Bank International gives home loans at the interest rate of 2.99% per annum. Provides free property insurance and can settle 40% of the outstanding loan payments.
  • HSBC bank offers home loans at the initial interest rate of 3.24% for both ex-pats and UAE nationals. It can clear 25% of the outstanding loan payments.
  • Emirates NBD provides loans to the salary limit of AED 15k and 15% loan to value.
  • Mashreq Bank provides loans to both UAE nationals and ex-pats. It provides home loans at a monthly income of AED 15K.

People can find out the monthly installment amounts through a mortgage calculator.

EMI= Principle amount + interest paid for the total amount

Getting property insurance is mandatory in UAE. However, the insurance policies in UAE are quite affordable and profitable in property matters.

You can do mortgage refinancing easily by just contacting your bank and finalizing the most suitable deal. Then your bank can start the process.

Buying a property in UAE may seem a difficult process. You need to be fully aware. Just make careful choices suited to your financial terms and you are all set to take property loans and buy a house in UAE.

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