9 things to do before applying for a mortgage in UAE

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If you want to buy a property in Dubai, there are two ways to go about it.

The first option is that you pay for the home with cash and the second one is you take out a mortgage. The latter provides you with more flexibility with regard to managing your finances. 

If you have thought about taking a mortgage in Dubai, first you have to know how it works and its process. And this article will tell you everything you need to know before you take out a mortgage in Dubai. 

9 Tips That Will Help You Secure The Best Mortgage Deals 

Home financing is a fiercely competitive market for banks in Dubai. And all licensed banks here provide some or other form of a mortgage.

One of the critical aspects that banks use to determine which applicants are eligible for which loan product is the credit history. There is an AI Etihad Credit Bureau, which monitors every client associated with the bank. Here are some behaviors that will make you more attractive to the banks and ensure you get a better deal on your mortgage.

  1. Understand The UAE Market 

Understanding how the UAE real estate market works will give you a head start. The market in UAE is very different from other countries. Therefore make sure that you hire a reliable real estate agent who can guide you through the process. They can help you work through the paperwork, fees, rules, and regulations, etc. 

2. Do Not Store Unnecessary Credit Cards

When evaluating your credit report, the bureau considers both the credit limit assigned to you and its utilization. Therefore, if you have five credit cards but use only two of them, then the ones you are not using affect your credit report.

If you are plan to get a home loan, return the credit cards you are not using. 

Alternatively, you can ask the banks that issue the cards to reduce the credit limit on them. For instance, if there is a card that you only use when dining out, then reduce the limit to the amount that you need to eat out every month. 

3. Understand The Mortgage

In the case of an off-plan, developers provide payment plans in which 100% of the purchase value is either paid before handover or a percentage is paid at that time. And the balance amount is paid after the completion of the project. 

In the case of pre-handover payment plans, the availability of mortgages will be based on the form of the payment plan. If the payments become due when under construction, the bank will offer a maximum of 50%, and you will have to pay the rest of the amount. 

But these forms of payment plans are rare as developers provide payment plans where most of the purchase price is due during the hand-over.

Additionally, for ready properties, the lenders consider offering mortgages based on the UAE lending caps. 

4. Compare Rates 

There are many interesting options out there; therefore, it is important that you shop around before making a final decision. There are dedicated sites that compare the plans of different lenders so that you can evaluate and make the best decision. Comparing options will ensure that you have assessed most of the options in the market to choose the best one for you. 

5. Try Not To Switch Too Many Jobs 

Banks do not prefer customers who change their jobs between six months and one year. They look for stable employees with reliable cash flows coming every month in their bank account. But that does not mean you should not take up a better package or your dream job; just avoid switching jobs too often. 

6. Do Not Take New Loans 

If you are serious about buying a home, then avoid taking any other kind of loan a year before buying the house. This is not the time to buy a car that you cannot afford; this will quickly make you appear unattractive to the banks. Similar is the case with personal loans; try to limit your personal and expensive spending during the time you are trying to take a home loan.

7. Show Sufficient Savings 

If you have a working spouse, then transfer your savings to one bank account. And, you can show this bank account on your mortgage application. It will assure the bank that you have enough savings to repay the loan timely. 

8. Smartly Use Your Savings 

If you are saving money every month, look for a way to secure it in some kind of deposit scheme by the banks. You can do that for one month that is updated every month. This will indicate to the banks that you are responsible and prudent. 

9. Understand The Mortgage Application 

Make sure that you only go for offers that provide everything in writing. It is a sign that the lender is genuine. Additionally, do not sign any documents without reading and understanding their content properly. The knowledge of a real estate agent or legal professional can be valuable here. It will help you to avoid any mistakes that might cost you big. So paying for professional help can be worth spending money on. 

 

What Are The Types Of Mortgage You Take In The UAE?

Following are the mortgage options available for you in the UAE:

  1. Fixed-Rate Mortgage 

In this type of mortgage, the interest rate is fixed prior to the loan tenure starts. Additionally, during the predetermined duration, which is generally five years, the rate does not alter. There are evident benefits with a fixed-rate mortgage as it is easier on the budget and helps you better play your financials.

If there are changes in the market situation and the interest rate goes down, you will be paying the pre-fixed rate. Similarly, if the rates go higher, you will have the advantage of paying a lower rate. 

2. Variable Interest Rates 

As the name suggests, in variable interest rate mortgages, the rate changes throughout the tenure of the loan based on the market conditions. If the market rate goes down, you may end up with a profitable deal. But if the market rate increases, you will be paying a higher rate for your mortgage. This type of loan is ideal for people who possess financial liquidity to handle altering repayments. 

3. Capped Mortgage 

You can also take a capped mortgage in Dubai, where you have some advantages. While you will continue to make repayment at variable rates, the maximum cap is set prior to the loan term starts. Moreover, generally, the capped period can be for a predetermined, limited time. The rate of interest moves up based on market conditions, but a certain limit is set beyond which the interest rate will not increase. 

4. Discounted Rate Mortgage 

In this form of loan, you will be paying a lower amount as financial assistance is offered on the variable interest rate you are paying. However, the discount is only for a short period, and after that, you will pay interest on a variable basis. 

5. Offset Mortgage 

You can integrate your mortgage account with your savings accounts or the credit card of the same financial institution. An offset mortgage is offered by limited banks in the UAE. You can connect your savings account, credit card account, current account under this form of a mortgage.

So your loan repayment can be taken from any of these linked accounts. And by periodically offsetting the amount, you may end up paying a lower interest rate. 

Who Can Get a Mortgage In Dubai?

Whether you are looking for a townhouse or villa or inclined towards an apartment, you can buy a mortgage in Dubai, considering you meet the eligibility criteria. To apply for a mortgage in Dubai, you have to be:

  • Based between 21 and 65
  • A UAE resident or national
  • Employed with a monthly income of AED 15K or self-employed with AED 25K monthly income

Expats can also get a mortgage in UAE; however, there are certain constraints. According to the UAE Mortgage Cap law, expats have to pay the down payment of 20%, which is 15% for UAE citizens, in addition to associated purchase costs. The down payment requirement for non-UAE residents varies based on the property. 

 

Type Of Purchase Purchase Price Maximum Loan-to-value Ratio Minimum Down Payment
First Property Under AED 5 Million 80% 20%
First Property Over AED 5 Million 70% 30%
Second, Third+ Property Any Price 60% 40%
Off Plan/Under Construction Any Price 50% 50%

 

What Documents Are Needed To Acquire Mortgage In UAE?

Individuals who wish to purchase property in the UAE must apply for one. The document requirement may slightly differ from one back to another, but generally following are the documents needed by the banks to apply for a mortgage in Dubai:

  • A copy of Emirates ID
  • A copy of passport and visa 
  • Proof of residences such as DEWA bill or tenancy contract 
  • A salary certificate for employment proof
  • Bank statements and payslips of last six months 
  • The latest credit card statements

 

How To Acquire A Mortgage In Dubai?

Following are the steps that you need to follow in order to acquire a mortgage to finance your home:

  • Look For A Lender 

In UAE, home mortgages are taken through banks that are registered with the Dubai Land Department (DLD). You can contact the bank directly and enquire about their available mortgage offers.

Another option is to hire a broker and let him or her work for you to provide the best mortgage in the UAE. 

Brokers have strong knowledge and insight into the local market and the best home loans that could be ideal for you. This way, you can focus your time and effort on finding the right home rather than getting caught up in the strenuous mortgage process. 

  • Selecting The Appropriate Mortgage 

As we mentioned above, there are different types of mortgages in the UAE. You must consider different factors when determining the type of home loan that is right for you. Some of these factors include your lifestyle, the loan amount you require, the type of property, the cash deposit you can manage, etc. 

Generally, banks have their mortgage calculators online, through which you can get an estimate of your monthly installment by adding your variables. 

  • Acquiring A Pre-Approval Letter 

The most important step of the whole process is getting the pre-approval letter. It is basically an official document issued by the bank. A pre-approval letter is an evidence that certifies that you are eligible for acquiring a mortgage. The letter highlights the maximum loan amount, providing greater certainty of acquiring the mortgage. Generally, it takes three to five business days for banks to send the pre-approval letter. 

  • Choose Your Home 

After receiving the pre-approval letter and deciding on a budget, you can start looking for your dream home. Pre-approval letters are valid between 60 and 90 days based on the lenders. Therefore, you have sufficient time to look for the property that you wish to buy. 

At times people have already found their property, and then they apply for the loan. But in this case, there are chances that they might not be able to secure the entire amount of the home value.

  • Finalize The Purchase Of The Property 

After selecting the property, you can go to the bank to finalize the mortgage agreement. The bank will appoint a property evaluator to assess the value of your property and then make an offer on it. Once the price is agreed on, you can go ahead with the deposit and decide a date for completing the transaction. On the day of the property transfer, the bank will release the loan amount to the seller. 

UAE offers plenty of opportunities to take a mortgage if you are eligible. There are many banks with interesting rates as well. It is important that you must be well aware of the real estate market to make well-informed decisions. And once your loan is approved, ensure that you pay the EMIs timely; otherwise, you will land yourself in big trouble. 

 

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