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What is EIBOR – Compare4Benefit

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EINOR

EIBOR stands for Emirates Interbank Offered Rate. It is the standard interest rate for loans granted between banks within the UAE financial market

It’s stated in the UAE dirham, which is the currency in the UAE. In Dubai and other Emirate kingdoms, lenders and borrowers use the EIBOR as a reference rate for conducting financial transactions. 

Understanding EIBOR

Like LIBOR (London Interbank Offered Rate), the EIBOR is a standard interest rate issued by the Central Bank of the UAE. It’s nothing but the average of interest rates offered by the major banks in UAE for short-term funding loans to other banks. The average interest rate decided by the UAE banks for which they give unsecured funds to other banks in the UAE money market is EIBOR. 

The average market interest rate of the regional banking industry is well-represented by the EIBOR. It’s the interest rate for liquidity management and short-term bank borrowing in the interbank money marketplace. 

In simple words, if any regional bank in UAE faces a liquidity crisis or needs money, they can take a loan from other banks. These lending banks incorporate the interest rate into the EIBOR when they report the offered rates the next day. Also, this interest rate is considered the benchmark for several other transaction prices, comprising consumer loans, Islamic finance, and mortgages. 

Latest News On The Eibor

Before April 2018, the Central Bank of the UAE directly calculated this interest rate. Since then, they handed over the daily calculation responsibility to Thomson Reuters Ltd. 

The bank keeps on publishing the previous historical data from 2009 along with publishing the daily EIBOR fixings. Several Islamic banks in the UAE use the EIBOR rates as a standard mark for knowing the rates for certain agreements called ijara, which is an installment leasing agreement. 

Ending Note 

EIBOR is a popular rate of interest followed by the major banks in the UAE. You can do more research to explore more about the amazing interest rate offered by the banks of UAE. 

Reversion Rates In UAE 2022 – Compare4Benefit

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Reversion Rate UAE

Who does not want to buy a property in the UAE? Many people look forward to taking advantage of the tax-free capital gains and returns on house rentals. Others look for family homes and lifetime investments.

For such people, the Central Bank of the UAE has introduced new initiatives and regulations that open up the UAE real estate market for other buyers from across the world. Sources suggest that nearly 13.6% of the UAE GDP comes from the real estate market only. 

Before we jump into all about Reversion rates, let’s get started with understanding reversion rates. 

Reversion rate is the interest that your mortgage turns to after the fixed mortgage period ends. Continue reading to know more about them.

What Are The Mortgage Types?

The two types of mortgages that you can take are:

  • Fixed-Rate Mortgage

The Fixed-rate mortgages provide a fixed term of up to 5 years. The most common fixed term is three years. After the fixed term is over, the rate will be moved to the Reversion rate, which is also known as the Follow-On rate. This gives you a short term benefit of being protected by the fluctuating interest rates due to inflation. 

  • Variable Rate Mortgage

These loans have their interest rate changing on the basis of the Emirates InterBank Offer Rate (EIBOR). This is considered to be risky because you do not know the amount that you will have to pay every year in the form of a mortgage. 

Loan To Value Ratio Has Increased By 5%

The law of UAE defines the eligibility criteria of a loan taker based on the loan to property value. In March 2020, the Central Bank of UAE took out a new rule. The rule said that all the banks and institutions could increase the LTV (Loan To Value) ratio for new buyers by 5%. This was the case for people who lived in the UAE and the foreigners as well.

This means that the foreign loan takers will get the chance to get 80%, not 75%, of their desired property value, and the UAE nationals can get 85%, not 80%. However, in the case of off-plan property, the LTV ratio remains constant at 50% for both foreigners and UAE nationals. 

Debt Burden Ratio

Under the UAE Central Bank rules, you can not spend more than 50% of your income on the repayment of loans, mortgages, credit card bills, and other debts. This is the maximum debt burden ratio that you can maintain in the UAE. 

Removal Of Age Limits

Earlier, the Central Bank of UAE asked for loan repayment of loans by the age of 65 by employed people and by the age of 70 by people who are working for their own business. In the previous years, this age cap was lifted, and there is no age limit to which you have to repay your loan.  

Key Takeaways

Even if you have taken a fixed mortgage, you will have to go back to Reversion rates after a point in time. That is why proper knowledge about the same becomes the need of the hour. 

5 tips to prepare for your hand over payment

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5 tips to prepare for your handover payment

Time and patience are two of the most important requirements when you are purchasing an off-plan property.

If you are waiting for your property to be built for a long time, then it is sure that you would not want to wait at all after it is built to be ready for your handover payment. You will also not want to wait at all to finalize the purchase of your property and get the keys to it in your hands as soon as possible.

So, if you are getting ready to get the keys in your hand by funding your handover payment with the help of a plan for post-handover payment, then here are five tips to help you get prepared.

Handover Payment

Before moving on to tips for you to prepare for your handover payment, you need to understand what handover payment is. The final payment you make to secure the purchase of your off-plan property is a handover payment.

Generally, in the UAE, the handover payment is 50-60% of the original price of the property. It is very likely that you will need to get a mortgage to finance this handover payment.

But there is a lot more than just the mortgage when it comes to being prepared before the date of the handover payment. Here are five tips to help you get prepared to make the final payment without any tension and stress.

5 Tips to Help Prepare for Your Handover Payment

1. Be Aware of Your Timeline

It is very likely that you can forget about the handover payment, and they can sneak up on you. So, this is a reminder for you to start prepping for your handover payment in advance. If you do not start getting ready to make this huge final handover payment, you can find yourself lacking time to arrange the payment.

If your plan to pay the handover is by getting a mortgage, you need a lot of time to find yourself a mortgage plan that works for you and submit the documents of the mortgage and the other documents to the bank. Official processes take time, so carrying some extra time on your hand will do you good.

A minimum window of 2-3 months is very important for you to begin and complete the mortgage time. This time period also gives you some extra time if you run into any troubles during the mortgage process. This time period will allow you to complete the mortgage process despite any problems you might run into.

So, make sure that you are aware of your timeline and do not end up having to pay any late fees for your handover payment to your developer. Keep track of the date that has been agreed upon to make the handover payment and work towards being punctual.

2. Market Value Changes

The valuation of your property that was decided on beforehand between you and your developer might not be the same as the property’s final market value after the construction.

So, it is vital that you are prepared for market value changes before the handover payment after the completion of the construction. If the final market value of the property after the construction is finished ends up being lower than the original valuation of the property.

Also, if your handover payment is being made with a mortgage, then the up-front payment that you have to make can end up being higher than what you actually prepared yourself for.

If the final market value of the property ends up being higher than the original valuation of the property, you might just end up with a lower down payment than you expected it to be.

Another thing you should take into consideration is that the loan-to-value ratio (LTV) in UAE has a cap of 80% for the people who are residents of the UAE. The people who have UAE nationality have a cap of 85% on the LTV ratio.

A cap on the LTV ratio means that if the amount you are borrowing turns out to be higher than 80%-85% LTV, then the difference above the percentage has to be funded by you from your personal stash.

3. Get Expert Advice

It is smart to make sure that you consult an expert before making any big financial decision. So, when trying to prepare for your handover payment by financing it with a mortgage, you are advised to consult a Mortgage Broker. 

A Mortgage Broker is an expert when it comes to mortgages. They will know all the technicalities that go on behind funding your handover payment with a mortgage. Their expertise will help you in finding the best mortgage deal as per your needs and preferences.

They will also help you in finishing the mortgage process with the bank as swiftly as possible. You should consider consulting a Mortgage Broker early on since they will have a much deeper understanding of the patience and time it takes to go through each mortgage process stage.

4. Get a Pre-Approval

Another thing that the Mortgage Broker can guide you through is applying to get a pre-approval. This will tell you and your developers the amount that the banks are willing to lend you. The validity of pre-approvals is usually 60 days so that you can have some time to prepare. These are a great way to relieve tour stress when close to the handover payment date.

5. Prepare a Backup

There can never be enough guarantee when it comes to banks and mortgages. So, try and make sure that you have a backup plan for your handover payment in case your mortgage falls through.

These are some tips to guide you through a handover payment and make sure that you get the keys to your house as soon as possible.

Can I Include My Spouse on My Mortgage?

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include spouse on mortgage

 If your partner is staying with you at your house and is contributing to the bills, it is a valid response to have them included on the mortgage of the house. The technicalities behind adding a partner to your mortgage or if it is the right fit for you are questions that can trouble anyone.

So, here is everything you need to know about adding your spouse to your mortgage, the legal process behind it, the expenses it can bring, and other options if that is not the right step for you.

The First Step

When it comes to adding your partner to your mortgage, the first thing that you should do is talk to your present mortgage lender. Similar to when you started your mortgage on your house, you were required to undergo affordability and credit checks to make sure that you could keep up with your repayments; your partner will also need to go through the same checks.

These checks are to make sure that they can keep up with the repayments. Your present mortgage lender might charge you a fee for conducting these checks.

Additionally, the mortgage lender is under obligation to add your spouse to your mortgage if they do not pass the affordability or credit checks. This decision is in their hand, irrespective of how well you might be keeping up with your mortgage repayments.

There is a possibility that your current mortgage lender might refuse to add your spouse to your mortgage. Your next option might be to hire a solicitor to get yourself some legal advice in such a situation. You will also need the legal advice of a solicitor when you decide which one of you will own how much percentage of the property.

Sometimes, you may end up in a what-if situation. This means that you need to start considering the repercussions of some possible future concerns relating to the mortgage. So, even if it is not pleasant to think about you must consider the fact that incase you and your spouse tend to split up in the future, it will be useful to have the house percentage worked out that each of you owns.

This will be extremely useful if and when you decide to sell the property after the split. The solicitor you hire for legal advice might as well charge you a fee for the advice, so consider that expense when you decide on your step forward.

There are two ways in which properties are generally shared. These are as follows:

1. Tenants in Common

In this situation, you and your partner decide the percentage that each of you will own. The percentage of the house does not need to be equally divided, i.e., 50/50. But, in the event of death, the portion of the house of the deceased’s will be transferred to the next of kin. This person might not necessarily be you.

2. Joint Tenants

This is, comparably, a lot simpler way of sharing your property since, in this, the property is equally divided between you and your spouse. In the event of death, the deceased’s portion of the house will automatically be transferred to you.

If you end up in a situation where your current mortgage lender refuses your request to add your partner to your mortgage, then there are certain ways around it. Let’s discuss these ways and see if they’re a fit for you.

Your Lender Refuses to Add Your Partner

If a situation develops where your current mortgage lender refuses to add your spouse or partner to your mortgage, it might not be the worst thing in the world. Just because your mortgage lender has refused does not mean that other lenders will refuse as well.

It might be smart to seek other lenders and speak to them about your problem. You must also consider if they might be willing to help you with it. You can apply with your spouse or partner for another lender and a joint mortgage this time around when you remortgage your house. This way, both of your names will be on the mortgage application. Sometimes, in this way, you can even end up getting a better deal on your mortgage.

However, another thing you need to remember is if you apply for a mortgage as a joint mortgage, then your and your partner’s credit scores will be associated. A bad credit score for your partner can mean a bad credit score for you as well, despite the fact that you have a good credit score. So, consider all the consequences and what-if situations before you make any final decision.

Other Options for Your Mortgage

If the idea of adding your partner or your spouse to your mortgage does not sound like the best idea to you, there are other options that you can choose for the time being. There is nothing stopping you and your partner from moving in together, despite the fact that they are not on the mortgage.

You and your partner can consider the option that they can move in with you, and instead of being added to your mortgage, they can just pay rent money. This money can cover the bills, the cost of living, and other utility necessities. This option is also the best if you both happen to split up after a while. In that case, your partner would not have any monetary or legal claim on the house.

The decision to move in with your partner or include them on your mortgage is yours to make at the end of the day. You need to consider your partner’s and your preferences very carefully. Also, you need to work out a solution that makes both of you comfortable about the mortgage situation.

So, it is best that you consider all of your options, as laid out above, before making a decision.

 

Freehold vs. Leasehold Dubai [Complete Guide]- Compare4Benefit

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Freehold vs. Leasehold Dubai

 

If you’re a foreign investor who wants to buy a property in Dubai, you’ve to understand the types of property ownership in this place first. As a prospective property owner, you must know the differences between leasehold and freehold ownership in Dubai.

This will help you make well-informed decisions while purchasing the property. Below is a compact yet precise informative guide on freehold vs. leasehold property in Dubai. Check it out. 

Freehold Vs. Leasehold Property In Dubai: Key Differences 

Dubai allows expats and foreign investors to own property in specified zones or areas. The right to own a property on a leasehold basis was granted by the Dubai government in 2001. And in 2002, the government passed the order for purchasing property in Dubai on a freehold basis. 

Buyer’s rights are the primary difference between leasehold and freehold property in Dubai. Here’s a precise review of these two types of property ownership:

  • Freehold ownership: If you buy a property in Dubai on a freehold basis, you’ll enjoy the complete property and land ownership. You can sell, occupy, or lease the property at your own will. 
  • Leasehold ownership: Those who buy property on a leasehold basis enjoy their rights over the property for a fixed tenure, which can go for a maximum of 99 years. However, the land won’t come under ownership rights as the freeholder possesses the ultimate ownership. 

Freehold Property Ownership In Dubai

The freehold property ownership allows complete ownership of the property as well as the land it’s built on to the buyer.

The owner doesn’t have to undergo any time restrictions. As per the rules regulated under the property ownership law in Dubai, the name of the freehold buyer will get registered as the “landowner” in the registry by the Dubai Land Department, which then grants the property’s title deed to them. 

The contract for freehold ownership is applicable in eternity. If the owner dies, their heir will inherit the property in Dubai, and it stays within the family.

Apart from expatriates, every foreign investor living abroad can invest in ready or off-plan property in some designated zones of Dubai on a freehold basis. 

Buying Freehold Property In Dubai: Pros

  • If you buy a property in Dubai which is freehold, you’ll get complete ownership and control over the land and unit. With freehold property, you can renovate or remodel the property structure while adhering to the guidelines set by the developers. 
  • Your freehold property in Dubai will stay within the family. When you pass away, your legal heir will inherit the property. 
  • You can sell, occupy, or lease the freehold property at your discretion in Dubai. 
  • As a freehold property owner in Dubai, you’ll get eligible for renewable residency visas, provided you meet all the required criteria and conditions. Also, you can get eligible for a 5-10 years visa with the introduction of long-term residency visas in the UAE. 
  • You’ll also enjoy the benefit of a wide range of properties available for purchase. The freehold areas or the designated zones in Dubai have great freehold property portfolios, which cater to different tastes, requirements, and budgets. 
  • You can also benefit from the high ROI or return on investment. For instance, you can get average rental returns of 7% with your freehold property. 

Buying Freehold Property In Dubai: Cons

  • Freehold property owners in Dubai have to adhere to the guidelines for the maintenance and upkeep of their property. For instance, if they lease out the property, they will be responsible for the maintenance or any major repairs, not the tenants. 

Leasehold Property Ownership In Dubai

If you buy a leasehold property in Dubai, you get the right to occupy it for a certain period. It’s a lease term, which typically lasts for 99 years but can be less depending on the circumstances.

The leasehold ownership only gives the right of ownership of the unit, but not the land it’s built on. When the lease period ends, the leasehold ownership reverts back to the freeholder. 

Related : Dubai Mortgage for Non Residents in UAE

Buying Leasehold Property In Dubai: Pros 

  • As a leasehold property owner, you can renew the contract to continue living in the property when the lease term comes close to the end. 
  • Buying leasehold property gives you the benefit of no maintenance and no repair cost liability. 
  • Compared to freehold properties, the average sales price is much lower for leasehold properties. 

Buying Leasehold Property In Dubai: Cons 

  • As a leasehold owner, you’ll have to get written approval from the freehold owner to make any alterations, remodeling, or renovation on the property. 
  • Some other issues faced by leasehold owners are restrictions on owning pets or subleasing the property. 

Freehold Vs. Leasehold: Which Is The Ideal Choice? 

Before determining between leasehold and freehold properties, you must understand the legal responsibilities and rights of both of these ownership types.

However, the ideal choice between them depends on your budget and requirement for the degree of control.

Get in contact with a government-registered agent to know what’s right for you.

NOC In UAE [March Updated] – Compare4Benefit

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NOC IN UAE

NOC stands for No Objection Certificate. The NOC is an extremely crucial document that several employees and foreigners don’t really know about. As the rules and regulations in the UAE are subject to constant change, it’s obvious for NOC to request only some specific procedures and not ask as a mandatory requirement. 

Similarly, for some other procedures, NOC wasn’t necessarily asked, but now it’s mandatory. This is why it’s crucial to know the UAE laws to understand when to use this important document. 

Understanding NOC in a Precise Way

To get proper insight and better understand NOC in the UAE, you must know its definition and meaning. NOC is also known as a No Objection Certificate or a No Objection Letter in UAE. 

It’s an important legal document issued by any institution, organization, company, or agency, and in some cases, even an individual can issue it. Mostly, the UAE government-based departments require this document for certain financial, immigration, or other official procedures. 

Purpose of NOC in UAE

A NOC in UAE is nothing more than a formal letter that serves the purpose, as implied by the name, of declaring that the issuer has no objection to the procedure or action that they’re going to carry out. You must know that the NOC certificate is quite simple. This hassle-free and not-so-long document precisely state whatever is essential for an easy way. 

Moreover, this document includes crucial information such as contact details, names, addresses, an official letterhead, date, and any other info needed for the procedure. NOC is commonly issued to the various UAE government departments, and its written content varies from one reason to another, stating why it’s drafted. 

NOC in UAE: When is it Required? 

Typically, you will receive the NOC from your sponsor or employer in UAE. Thus, it’s best to know when you may need to ask one. Some procedures where you may need a NOC in UAE as a part of your documentation include: 

  • Getting a driving license in UAE
  • Adding/renewing activity to your UAE-based business
  • Switching jobs from one private company to another
  • Opening an internet account or bank account in the UAE
  • Buying a car in UAE
  • Opening a branch
  • Adding a partner on business
  • Lifting a labor ban

Apart from all these scenarios, it’s crucial to point out that you may require a NOC in UAE for any immigration-related purpose too. 

NOC in UAE: Do You Need it to Work Here? 

Many foreigners think that a no objection letter is essential from their employer or sponsor to work in UAE. This is true only if:

  • You’re transferring your sponsorship to a new sponsor or employer
  • You have finished your labor contract
  • You’re switching your job

NOC in UAE: Characteristics 

A NOC or no objection certificate in UAE from the employer consists of the following characteristics: 

  • The NOC must be drafted in either Arabic or English
  • The NOC must be issued by the sponsor or employer
  • It is completely a discretionary document that the employer must freely issue 

NOC in UAE: Do You Need it for Visa Application?

It can be confusing to know which document you need to fulfill the documentation requirement for a UAE visa application. It mostly depends on the type of UAE visa you want. 

For instance, if you want a work visa for UAE, you won’t be asked to submit any NOC. That’s because your employer will be responsible for your entire visa processing, so they’ll take control of the entire processing and documentation criteria. 

 Do You Need NOC for Business Operations? 

If you’re a foreign investor, you’ll be asked to submit a NOC for getting visa approval to start any business operations in the UAE. But it’s best to check whether it’s needed depending on the jurisdiction and business structure. 

Do You Need NOC to Lift the Labor Ban? 

When it comes to lifting a labor plan, a NOC in UAE plays a vital role. First, you must know that a labor ban is a legal implementation by the Immigration authorities in the UAE on someone for the following reasons: 

  • Ending of an unlimited labor contract prior to completing even one year of service
  • Expiry of a labor contract and no action taken by your current employer concerning your employment
  • Ending of a limited labor contract before the expiry date

Concerning this factor, if an individual provides consent and other reasons in resignation, they get about six months or a one-year ban based on what kind of contract it is. However, if you want to prevent or lift your ban, you will need the NOC from your sponsor or employer. 

 How to Prevent Getting a Labor Ban?

You can prevent getting a labor ban in two ways, which are as follows:

  • Consider a different employer for transferring your sponsorship
  • Before the contract expiration date, your employer must extend the employment contract

You will need a NOC in UAE when it comes to transferring your sponsorship. For transferring your Labor Card, ask your current employer/sponsor to issue a NOC in UAE. Once you complete the labor contract or manage to be in the midst of the sponsorship transfer process, you can do this process. 

Tips to Lift a Labor Ban

As mentioned earlier, the regulations and guidelines in the UAE are subject to constant change. So, the latest update mentions that for lifting a labor ban, you’ll need to get a NOC in UAE from your current sponsor or employer. 

Moreover, the current employer must offer a minimum wage of AED 12000/month for bachelor’s degree holders, AED 7000 for diploma holders, and AED 5000 for high school diploma holders. Below are a few steps to follow while lifting the labor ban:

  • Ask your new employer to give the NOC in Arabic
  • Ask your current employer to provide the offer letter
  • Draft and sign a personal request letter
  • Go to the Ministry of Labor site for submitting your documents
  • Wait till you get the approval
Ending Note 

With this comprehensive guide on NOC in UAE, you must have understood why it’s such a crucial document across UAE, its purpose, and when you need it. So, get the best insight and know when to provide this document in UAE. 

 

Process of Buying a Property in Dubai

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Buying a property in dubai

Dubai has become a very famous place for foreign investors and ex-pats. In recent years, it has been observed that changes in the law have opened doors to the Dubai property market to foreigners. It is always recommended to seek the expert’s advice to help negotiate the local laws and regulations. Purchasing property for investment can also invite unexpected problems and recurring costs. So, you need to watch out for any mistakes you make. 

It could also include difficult tenants, evictions and revised Dubai property laws. Thus, it becomes essential to comply with the legal procedures for buying property in Dubai. There is a high choice of property available for prospective buyers in the specifically designated areas of UAE. 

Dubai Apartments At Affordable Prices: An Average Drop of AED 400,000

In this article, we will go through buying property in Dubai and how you can purchase a property from a developer in Dubai. So, without any waiting, let us help you with it. 

Part 1: Finding Property To Buy

  • Determine What Type Of Property You Are Interested In

Foreign buyers often select to purchase apartments, townhouses, or villas, generally located in secure complexes. These may come with luxurious facilities like tennis courts, swimming pools, and gyms.

Always keep in mind that you are looking for a property only in that area where foreigners are allowed to purchase the property. The most popular developments include Emaar Towers, Jumeirah Gardens, and International City. We promise; they will leave you wanting more.

  • Start Searching Online

With any property search, the good place is to start searching online. There are multiple agencies and estate agents who list property in Dubai online. You can also find useful ratings and reviews for the same. You can buy the properties from these agents or property developers. The estate agents sell the resale properties or the properties already built have previous owners, and developers sell off the properties which may be under construction. 

  • Contact Specialist Agents

If you wish to obtain help with the search, it is best to talk with someone who has specialized knowledge regarding property marketing in Dubai. The estate agents can help you find a property in Dubai and explain the options. Big real estate companies are also used to dealing with foreign buyers and helping them in purchasing a property. 

Since laws and regulations quickly change in Dubai, hiring an agent can help avoid potential pitfalls. Generally, their expected fee is between 2% to 5% of the property’s value. So, the regulatory body for Real Estate in Dubai is the Real Estate Regulatory Agency. 

  • Attend Property Fairs

The property market in Dubai is young and growing very fast. As a result, a significant amount of property is purchased by the foreigners directly from the developers who might not have completed the overall construction of the property.

Property fairs are one of the best ways for developers to present their work and meet prospective buyers. These property fairs are held all over the world. 

Before registering property in Dubai, make sure that the developer is licensed with the Real Estate Regulatory Agency. To find a list of licensed developers, one can browse a list on the Dubai Land Department website. You will find relevant information there whenever in need.

  • Visit Dubai

Before moving for a property, it is better to spend some time in Dubai itself. When buying a resale property, make sure that you view as many properties as available. It will help you gain better insight into the right properties to purchase. Also, ask the same questions you might ask when buying the property anywhere else. 

If you are planning to buy a property whose construction is not yet completed, make sure to see some properties by the same developers. When staying in Dubai, the access to paper listings in local newspapers and magazines will help in notifying about the property fairs which continue throughout the year.

Part 2: Meeting Eligibility And Financial Requirements

  • Having required ID and visa documents

The change to the law in 2002 has become much more direct for foreigners to purchase property and rent in Dubai. Still, there is a need to present a valid passport. Also, there is no requirement to hold any residency permit for purchasing the property. The UAE government has a six-month visa for property buyers known as Property Holders Visa. 

This enables the foreign investor to reside in Dubai for six months while investigating investments. The property must have a value greater than 1 million Dirham to qualify for this. The purchase made should be individual, not as a company.

  • Determine The Full Cost

To purchase a property in Dubai, you need to be certain that you can afford the property and meet all the costs associated with the purchase. When determining the overall cost of the property, it should include purchase price, deposit, transfer fees, estate agent fees. 

The potentiality of fluctuation for currency exchange rate should also be considered. It is advisable to employ a lawyer who will help negotiate all the paperwork. The full cost should also include the cost of a lawyer. A newly built property might require a land registration fee of around 2%. 

  • Get A Mortgage In Dubai

Non-self-certification of mortgages is not available, and the paperwork can be challenging for people who are not accustomed to vigorous paperwork. In some cases, the buyer may also be required to put down between 20% to 50% of the value of the mortgage in cash. 

Mortgages in Dubai are paid in monthly installments. The maximum length of the mortgage plan extends up to 25 years, and the repayments combined expenses should not exceed 35% of the monthly income. 

Related : Best Mortgage Rates in UAE

Part 3: Buying Off-Plan Property

  • Submit A Reservation Form

When buying an off-plan property, the first step is to secure finance and submit a complete reservation form. The form summarizes the basic terms and conditions of the sales agreement, which includes information on the payment plan and personal information from all the parties. 

You are required to submit your passport along with your reservation form. It is advisable to be aware of developers selling leasehold instead of freehold titles. Understanding the details for the contract and getting it checked by the lawyer is the best thing done while buying an off-plan property. If the development of the property is not complete, make sure of the reason for the delay.

  • Paying The Reservation Deposit

Once the reservation documents have been agreed upon, the amount is stipulated in the reservation form but is generally between 5% to 15% of the purchase price. Developers often do not draw up the official sales agreement until the deposit is made. So, these payments are transferred to the developers as the construction work is completed.

  • Complete A Formal Sales And Purchase Agreement

A formal sales and purchase agreement is a formal and legal bond. The document states by which date the property will be completed and what penalties the developers will incur if the construction is delayed. A lawyer is also entitled to look over the contract and check all the details with terms and conditions. If the property is mentioned to be furnished, make sure that the date for when it is to be done is included in the agreement. 

  • Transfer The Deeds

For a successful purchase of property, you must transfer the deeds. This is a point where you have to pay 100% of the purchase price. The deeds should not be transferred, and you will not be able to own the property until the entire payment is being paid. So, secured financing is a very important factor to be considered when purchasing a property in Dubai. 

If the construction of the property is completed, the transfer will take place in Land Department Offices. If it is yet to be finished, the transfer of deeds will occur at the developer’s office. You will also be invited to inspect the property and highlight any final issues required for the further development of the property. 

Part 4: Buying Resale Property

  • Make A Memorandum Of Understanding

You should agree with the seller’s terms and record the same in a Memorandum of Understanding. MOU is a basic document that highlights the terms and conditions, including the date of purchase of the property. It is not a legally binding document but is an essential first step when buying a resale property. 

  • Make The Initial Deposit

When the Memorandum of Understanding is signed, the purchaser must pay the deposit amount. This deposit amount is around 10% of the purchase price. The initial deposit is usually non-refundable unless there is a specific reason behind the seller not bringing the transaction forward. The purchaser also needs to pay the real estate commission, which lies between 2% to 5%.

  • Obtain The Deeds

Once the agreement is signed and financing is done, the purchaser needs to make a move of complete payment. You will have to pay 100% of the purchase price as an expat before transferring the deeds. This is just the same when buying an off-plan development. To make the entire payment. 

You might have to attain an appointment at the land department and show all the paperwork. The real estate agent and a bank person financing the purchase will also have to attend the meeting at the land department. 

How To Purchase From A Property Developer?

An expat or a foreigner can invest in Dubai property through a highly reputable real estate developer. You will have to pay a reservation or a token fee and book the property for initiating this process.

While paying the reservation fee, you will also have to show your valid passport. Bookings for buying property in Dubai can also be made online. A customer representative shall take care throughout the process and information about the different property prices. 

The real estate developer provides a No-Objection Certificate with a specific fee amount. Followed by this, the sales and purchase agreement is signed and drawn up. Transfer of ownership can also be made at Dubai Land Department after issuing title Deeds. The whole procedure takes about 30 days to get completed. After that, you can even evaluate other properties which are available for sale.

When Is The Good Time To Purchase Property In Dubai?

Purchasing property in Dubai is a very big decision, and it cannot be taken in haste. Considering the buying decision from an investor’s point of view, purchasing property in Dubai is a very attractive option. It provides the investors with wholesome opportunities to buy a good deal on the property. 

This can even result in having better returns on investment if the economy continues to grow. The recovery and the demand for a rental property are constantly increasing, making property dealing opportunities in Dubai quite famous. 

Summing Up

Dubai has charming apartments in high-rise towers near Burj Khalifa and the popular Dubai Marina. Prospective buyers who are thinking of purchasing spacious villas with master developments can anytime explore the real estate in Dubai.

Purchasing a property in Dubai has many advantages associated with it. It is very easy to maintain, and with new technology, the customers can purchase the property with confidence. 

The easy payment process, virtual tours and streamlined procedure with easy contact with developers have made it easy for potential buyers to purchase property in Dubai. The government of Dubai also provides great support to the UAE’s real estate sector to help them establish the most important sector across the globe.

As such, purchasing a lavish property in Dubai is a dream for many foreigners and expats. Along with considering the advantages, the buyers must also consider the legal procedures and seek help of the experts and lawyers for purchasing the best property.

FAQs on Buying a Property in Dubai

  1. What is the time frame for purchasing a new house in Dubai?

A typical property transaction in Dubai takes roughly 30 days from the date the Agreement for Sale is signed to completion.

  1. How can I calculate the value of a property in Dubai?

House Finder Group, an online real estate platform, has created a free application that allows individuals to estimate the cost of a property in Dubai.

  1. What kind of taxes does the owner of the property have to pay?

There are no taxes on property or any money earned from it in the UAE because it is a tax-free country. However, the property owner is liable for the annual maintenance fee and service charge payments, which must be paid to the management company appointed by the owner’s association.

 

Early Mortgage Loan Settlement UAE – Compare4benefit

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Early Mortgage Loan Settlement UAE

In this article, we will provide you with relevant details about early mortgage loan settlement UAE. So, keep reading until the end. It is bound to help you.

There is a load full of reasons why one should clear up their mortgage in the UAE early. Some of those reasons include leaving your country or even selling out the mortgage rather than renting out your property. But is this the ideal way to opt, and does it even provide you with the right benefits?

Things that are bound to happen if you settle your mortgage early

When you have opted for a mortgage and the lender has accepted it, he has done so by first calculating their profit. Financial institutions’ calm and patient behavior allows them to think rationally and consider a higher sum that can be obtained during a bigger course of time rather than making quick but small profits.

They consider mortgages to be an impactful procedure, as they are bound to opt for customers who are paid every month. They also get a reasonable profit, making them again from all aspects. 

So, given this matter of solid thinking, you will get to how opting for a mortgage will restrict the bank from receiving future payments of interest. They are bound to make little or no profits from the mortgage, making them lose you as a vital customer. To avoid this, the banks or other financial institutions that act as lenders charge reasonable settlement fees to cut down their losses. 

The Benefits Of Opting For Early Mortgage Loan Settlement

Some advantages the potential customers are bound to get if they opt for a mortgage loan settlement are:

  1. By opting for settling your mortgage early, you are bound to be saved from paying huge amounts of interest as payments for the future. 
  2. While going for a fixed mortgage settlement, your savings will appear clearer as the repayments will be calculated more accurately. 
  3. Though one finds it easy to pay timely interest every month, it is way better if you are freed from the problem of doing so. This is because the burden of repaying the interest payments every month can be overpowering and can cut off a huge portion of your monthly salary. 
  4. Your quality and leisure of life are sure to increase if you choose to opt for an early mortgage settlement. It is a perfectly beneficial choice one must make. 
  5. If you come across the opportunity of settling a mortgage with an exquisite rate and want to switch over, never let go of it and hold it tight. You will not get such a golden benefit every time. 

The Early Mortgage Settlement Repayment Fees Charged

As the lenders get little to no profit if they accept an early mortgage settlement, it becomes difficult to make a living out of it. So, to compensate for such a loss, the banks and financial institutions charge a lender’s settlement fees. That is why, it is advisable to have a thorough talk about this with your respective lender to avoid conflicts of interest and misunderstandings in the future. They will help you massively to get out of your problem on time. 

Every mortgage is distinct in its way, and the lenders accepting this kind of settlement have different types of terms decided. Due to this difference in mortgage rules for every lender, it is vital to have it discussed and settled at the earliest. 

Different lenders charge different rates. While some lenders charge a rate as low as 1%, others charge a higher rate up to 2% or 3%. Always opt for a lower repayment fee, as it will save you from a lot of distress about paying the interest as soon as possible. 

Related : Best Mortgage Rates in UAE 2022

How To Repay The Mortgage Loan?

This question holds vital importance in deciding the eligibility of early repayment. Different lenders are bound to charge completely distinct fees based on the payments coming from. The loan settlement fees will be below if you are repaying using your amounts stored. However, on the other hand, if you are repaying via your business finance, a large settlement fee is likely to be charged by the lending institutions. 

The reasonable fees charged for loan repayment also depends on the nature of different lending companies. Some companies are lenient to the customers so that they charge a really small amount of fees if the payments come from the personal savings of the customer rather than the business finance. As such, the payment makes a huge difference in the number of settlement fees where you decide to settle. 

What Happens When You Settle The Loan Early?

In this method of settlement of mortgage loans, the case of interest is quite the opposite. Here, if you plan on paying off the loan extremely early, you are bound to be burdened with many early redemption fees, which will cost you a huge fortune. However, if you choose to wait for a few years before settling the loan, you are likely to enjoy the benefit of a light, breezy settlement fee. As the number of penalties will drop down to a much more considerable extent, you will be relaxed and gain its benefits when in need. 

If One Pays Off The Loan Faster, What Will Happen To Overpayments?

Though the main fact is that paying off your mortgage loan early can unleash a heavy burden of higher penalties, you will also be provided with benefits. This can be proved by stating that numerous banks of UAE offer the benefit of overpayments with zero fees. This is sure to provide you with two major advantages- to lower the interest to a drastic extent and to accelerate your mortgage. 

Given the salaries prompted in the UAE, this will be a more fruitful opportunity to opt for rather than in Europe. This is because, in Europe, the impact of the rate percentage of your mortgage will be more consequential. 

Paying more than the payment of monthly mortgage prescribed regularly will reduce the years of the final settlement. So, if you truly wish to pay back your mortgage early, you will be provided with the advantage of paying lower fees. 

Why Is It Vital To Discuss Your Early Mortgage Loan With Your Advisor?

If you are completely sure about settling your mortgage loan earlier than the prescribed time, you must make sure to consult the whole thing with your advisor before taking the next step. This step is crucial and should be taken before finalizing your mortgage loan repayment. By doing this, all of your future expectations and factors will give vital importance and will allow you to select the mortgage most appropriate for you. 

Since the main purpose of opting for an advisor is to make it easier and more beneficial for you, you must consider this. As such, the only support required by the advisor from your end is that you provide them with accurate and all of the information they should know about. 

Early Mortgage Loan Settlement in UAE 2022

By taking the last 25 years in comparison, it has been noticed that the maximum tenure on a mortgage loan is drastically higher in length than that of other loans. Though it has been the sole aim of the people opting for mortgage loans to have the ability to be debt-free before the period of repayment, the lenders are bound to charge a particular amount as mortgage settlement fees.

In UAE, this rate of mortgage loan settlement was a maximum of 3 percent of the total loan yet to be received. Clearing the loan early can be quite expensive, as the capital is large for most cases. 

The Mortgage Loan Borrowers Have Been Encouraged To A Drastic Extent

Over the last 25 years, the rate of loan settlement in the UAE was believed to be 1 percent, and the UAE Central Bank uplifted this to 3 percent last year. This enabled the mortgage lenders to charge a settlement fee of rate up to 3 percent of the loan yet to be paid. Seeing the failure prevalent by doing so, the UAE Central Bank reduced the rate of mortgage settlement fees back to 1 percent. This encouraged the borrowers to promote clearance of their loan and become debt-free if the lenders were willing to offer additional benefits for granting this type of loan.

This will ultimately lead to the borrowers’ saving of a lot of money, as they will freely be able to clear off their debts at a faster rate. So, focusing on such a factor can help you a lot to make better financial decisions too.

Now, the customers who have already been free of their debt by clearing the mortgage loan can make a visit to their lender’s office for the refund of the extra amount paid earlier. By reducing the settlement rate of this kind of loan, the UAE Central Bank has also increased the maximum age criterion of people who can opt for a mortgage loan. Now, mortgage loans can be granted to people who are less than 70 years old at the time of loan repayment.

In this process, the lenders themselves can decide the most appropriate age limit, thus avoiding any confusion or hindrances. By the upliftment of age gaps, several opportunities have been created to benefit selected real estate investors. 

A Positive Impact On The Real Estate Market

The reduction of the mortgage loan settlement rate from 3 percent to 1 percent by the UAE Central Bank has created a positive and significant impact on the present and future of the real estate market. By doing so, the UAE will be enriched with benefits in numerous ways. They will now be able to significantly boost their property sales and serve as an encouragement to promote new, potential investors in the real estate market. This will also help save a large amount of money both on the rate of interest and the charges of early redemption. 

Has The Decision Of Reducing The Rate Of Mortgage Loans Been Significant On The Borrowers?

The UAE Central Bank has initiated a new rule of reducing the mortgage loan settlement rate from 3 percent to 1 percent. This also helps make sure that the customers who have paid extra interest in the previous years will be refunded during one month.  As such, there are many people who also wish to exit their mortgage early and will not be charged an early 3 percent rate of settlement fees. This move has proved significant for the borrowers as they can now turn towards lenders who will offer better and lower interest rates for the mortgage loan settlement fees. 

Also, these borrowers will benefit from making a lot of savings, as they do not have to pay higher payments as interest. This new system has been prevalent since June 2018 and has positively impacted the lives of several mortgage loan borrowers. These lower fees will assist the borrowers to take full advantage of whichever loan rate is lower, thus being able to refinance with other, more potential lenders. Such a strategy is bound to show positive results at the end of the day.

Another amendment made by the UAE Central Bank is removing the age gap for opting for a mortgage loan. One can only issue mortgages to those who will be 70 years old or lesser at the time of loan repayment. This will create better and more profitable opportunities for both buyers and investors, as they will be more than willing to use such facilities. 

The Bottom Line

Given the recently introduced amendments made by the UAE Central Bank, early mortgage loan settlements will prove to be a boon for both the investors and the borrowers. Helping people make a lot of savings every month and allowing people of almost every age to opt for such a loan are the two important benefits of an early mortgage loan. 

FAQs

  1. What is the time frame for purchasing a new house in Dubai?

A typical property transaction in Dubai takes roughly 30 days from the date the Agreement for Sale is signed to completion.

  1. How can I calculate the value of a property in Dubai?

House Finder Group, an online real estate platform, has created a free application that allows individuals to estimate the cost of a property in Dubai.

  1. What kind of taxes does the owner of the property have to pay?

There are no taxes on property or any money earned from it in the UAE because it is a tax-free country. However, the property owner is liable for the annual maintenance fee and service charge payments, which must be paid to the management company appointed by the owner’s association.

 

Why do banks require a security cheque in UAE

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Security Cheque in Dubai

A security check is essential when applying for a loan or some financial funding in the UAE. You must understand the basic functioning of the security checks before getting a mortgage loan to avoid misunderstanding later. 

Understanding With Example

Suppose you take a loan of amount AED 100,000 for a four-year tenure at a fixed interest rate of 4%. In that case, you will owe a total of AED 116,000 to the bank. On the other hand, you will pay back this loan in installments. So, if you fail to make payments at some point, the bank will use your security checks to cover the interest income and expenses. The bank will encash your security check if you fail to make the loan payments. 

Previously in the UAE, it was common for banks to ask for blank security checks from the borrowers prior to granting any financing. Consequently, the banks could write any amount they wished on the signed checks. This emerged the unpredictability of how much customers will be accountable for in the event of a default. This misunderstanding was cleared by the Central Bank of the UAE when they announced that customers wouldn’t have to provide blank security checks to the banks anymore. 

When granting various forms of credit facility like car or personal loans, credit facilities, or mortgages, every UAE-based bank asks for security checks. 

What To Provide Then?

You have to provide an un-dated check to the bank that can cover the total credit amount at a minimum. A security check is required by most banks in UAE when they authorize a credit card or a loan. The bank uses the security checks when the borrower or credit card holder doesn’t make their debt payments. You can consider it a type of bank guarantee request against your borrowed money or credit. 

You must know that a security check is a routine check issued by any regular check holder. The date on such checks is left blank, and they must be signed and issued to the bank. 

What Benefit Do Banks Have?

Suppose you fail to make the debt payments for quite some time (commonly three months). In that case, the bank will first give you some friendly reminders, and if you don’t respond, they will use the security checks to cover their income. 

Security checks benefit the banks when their credit or loan holder fails to make installment payments. They can do so by depositing the security check for encashment. The check will get exchanged for cash only if the loan holder’s account has money. If not, the check will get bounced or dishonored, and further actions can be taken against them. 

In the past, the outstanding loan balance was taken into consideration when banks needed to enter the check amount. However, with the latest guidelines from the Central Bank of UAE, security checks should only have the date column blank, and the loan and interest amount must be written on the check. 

Final Thoughts 

With several financing services in Dubai, it has become easy, hassle-free, and convenient for people to get a loan. With this precise guide on security checks, you can smoothly proceed with your documentation requirements while applying for a loan or credit card in Dubai.

Mortgage Life Insurance in UAE – Compare4Benefit

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Mortgage Life Insurance UAE

One of the most significant financial commitments you can make is a home. You’ve finally closed on your mortgage. Congratulations! You are now the proud owner of a home. This is one of the most important decisions you’ll ever make. It’s also one of the biggest investments you’ll make in your life because of the time and money you’ve put into it.

As a result, you’ll want to make sure your dependents are protected in the event you pass away before paying off your mortgage. Mortgage life insurance is one of the options open to you. But, do you truly require this?

In this article, we will thoroughly analyze mortgage life insurance in UAE. As such, you can take the right decision to secure your family’s financial future in the long run. 

What is Mortgage Life Insurance and How Does It Work?

A mortgage life insurance policy is a term life insurance policy designed to pay off the borrower’s mortgage debts and associated charges in the case of the borrower’s death.

These policies are not the same as standard life insurance policies, and the death benefit is paid out when the borrower dies in typical insurance. A mortgage life insurance policy, on the other hand, does not pay out until the borrower dies while the mortgage is still active and the beneficiary is the mortgage lender. 

As mortgage payments are made, the life insurance policy’s term matches the mortgage’s. The death benefit is typically reduced each year to correlate with the current amortized mortgage total outstanding. It’s not like other types of life insurance.

Unlike standard life insurance, which pays you a death benefit to your beneficiaries when you die, mortgage life insurance only pays off a mortgage after the borrower dies as long as the loan is still owed.

If you die with a mortgage, this is a significant benefit to your family. However, there is no payback if there is no mortgage.

One thing to keep in mind is that mortgage life insurance is not the same as mortgage insurance. The latter is a type of private insurance required by some conventional mortgages.

While mortgage life insurance protects you, the borrower, and your heirs, mortgage insurance protects the lender if the mortgagor cannot meet their financial commitments. Premiums are paid individually or as part of the borrower’s monthly mortgage payment.

Keep an eye out for monthly mailers and phone calls offering to sell you a mortgage life insurance policy after you’ve closed on your loan. These inquiries are frequently disguised as official mortgage lender requests.

Why Do Homeowners Require Insurance Protection?

Your mortgage comes with many financial risks until it’s paid off. If you cannot make your monthly payments, the bank may sell your home to cover its losses. That’s why many homeowners co-sign a mortgage with another person, such as a spouse, partner, or even a parent. This person is frequently assisting in reducing the financial risk of purchasing a home.

What happens, however, if you pass away unexpectedly? Your co-signer may be left with sole financial responsibility for the mortgage. If this happens, it may jeopardize the stability you’ve worked so hard to establish. That’s why having insurance in place is crucial – it provides a financial cushion for your beneficiaries in the event of your death.

Difference Between a Mortgage Life Insurance and a Personal Life Insurance

Mortgage life insurance pays for the remaining balance on your loan, which decreases as it is paid down. On the other hand, personal life insurance usually remains the same and is unrelated to your mortgage.

Personal life insurance can help you today while also adapting to your changing demands in the future. You might be able to make big changes to a personal life insurance policy without incurring high costs. As you have children (or as they get older), your family’s financial status may alter, and personal life insurance can help you deal with these new financial realities.

As a mortgage borrower, you have the option of purchasing mortgage life insurance. It’s intended to pay off or reduce your mortgage if you pass away. The insurance proceeds are always applied to the outstanding balance on the mortgage. This can assist your family when they stay in their house even if the principal source of income that was previously utilized to pay the mortgage is no longer available.

When your mortgage is paid off, your life insurance coverage expires. Your life insurance policy is unaffected by completing your mortgage, and it can continue to protect you and your family in the years ahead.

Mortgage life insurance obtained through a financial institution is normally quick and simple, requiring only a few health-related questions to be answered. On the other hand, personal life insurance usually takes longer and necessitates a thorough examination of your medical history.

Personal insurance and mortgage life insurance can help you pay down your loan. To maintain the coverage in place, you must pay regular premiums for either type of insurance. However, in the case of mortgage life insurance, the policy’s beneficiary is your mortgage lender, not the beneficiaries you choose.

If you die, your mortgage balance is paid to your lender. Your mortgage will be paid off, but none of the proceeds will go to your surviving or loved ones.

Different Kinds of Mortgage Life Insurance

There are two basic types of mortgage life insurance. The policy’s size decreases as the mortgage’s outstanding balance decreases until both reach zero. As a result, as it approaches zero, the payout decreases; the other type of mortgage life insurance is termed level term insurance, and in this, the policy’s size remains constant. A borrower with an interest-only mortgage would benefit from level term insurance.

Before purchasing mortgage life insurance, a potential policyholder should carefully research and analyze the policy’s terms, expenses, and advantages. Keep in mind that there are two lifespans to consider: the policyholder’s lifespan and the mortgage’s lifespan. It’s also worth looking into if term life insurance could provide your family with the same level of protection at a lesser cost and with fewer limits.

Pros of Mortgage Life Insurance

Since mortgage life insurance is often issued without underwriting, it may assist those who do not qualify for term life insurance due to bad health. As with any other policy, candidates should get estimates from various companies and examine each one’s financial strength rating with AM Best, a company that assigns letter grades to insurers.

No-medical-exam term insurance with level premiums and death payouts is recommended for those who want to avoid declining-payout policies. Yes, these plans are more expensive. They may provide less coverage than term policies that assess medical histories and conduct physical exams.

However, they will pay the same benefit regardless of whether you die 10 or 25 years after you take out your mortgage.

Another option is to get a policy that provides additional coverage for a lower price earlier in the duration of your mortgage. Consider switching to a guaranteed issue term policy once you’ve paid down the principle considerably.

If you never file a claim after paying off your mortgage, certain policies may refund your premiums. However, the premiums you receive will most likely be worth significantly less because of inflation. Furthermore, you will have squandered the opportunity to invest any money saved if you had purchased cheaper term life insurance.

Some other benefits are that the heirs won’t have to worry about what might happen to the family house if they have a mortgage life insurance policy. The mortgage life insurance policy will pay off the entire mortgage loan if the insured dies or becomes gravely ill and unable to work.

This coverage relieves the worry of a policyholder about their family having a place to live if they die or are unable to work. The family will always have a place to live now that the mortgage is paid off, as long as they can afford the property taxes and insurance each year.

Most standard life insurance policies, with a few exceptions, do not pay out unless you die during your policy period. Most mortgage life insurance policies, on the other hand, provide coverage if you become disabled or unable to work, making it a little more versatile than a standard term or whole life policy.

Cons of Mortgage Life Insurance

Mortgage protection life insurance is, in most cases, a bad idea. To begin with, there is no room for adjustment. Unlike traditional term life insurance, which allows beneficiaries to spend rewards as they see fit, most insurers transfer benefit payments directly to lenders, meaning your beneficiaries will never receive any money.

Second, be prepared to pay a lot of money for your insurance. These policies are frequently more expensive than standard life insurance if you are a healthy individual who has never smoked tobacco. For you, traditional life insurance might be a better choice. Beyond your mortgage, these insurances do not cover your family’s financial necessities.

There’s also a significant likelihood that there won’t be much transparency. Unlike other types of insurance, getting quotations for mortgage life insurance online is difficult, which is a serious worry because pricing can vary greatly.

For people in good health, it’s expensive. Mortgage life insurance policies are often more expensive than term life insurance policies for the same amount of coverage since they do not consider your health. You can get greater value from a term life insurance policy if you’re in generally good health.

Finally, keep in mind that your insurance premiums will change. Premiums for mortgage life insurance policies may only be fixed for the first five years, after which they may soar at any time. This contrasts with term policies, which charge fixed premiums for 30 years with no unexpected price hikes.

However, most families require more financial safety than enough to meet their mortgage payments. A borrower should consider income replacement for all of their many financial responsibilities.

Declining Payout Policies

Some insurers provide policies with fixed insurance rates for the policy term. However, when prospective rewards decrease, the payout on these plans may reduce over time. This sort of mortgage life insurance, also known as decreasing term insurance, is meant to pay off your mortgage balance as your beneficiary pays down a portion of your loan each month. As a result, the policy’s potential payout shrinks with each mortgage payment.

On the other hand, some modern products offer a feature known as a level death benefit, which means that payouts do not decrease as time passes. If you cover a $1,00,000 mortgage, for example, your recipient, not the lender, receives the entire $100,000, even if the mortgage amount is reduced to $65,000. Some policies allow you to convert your mortgage into a life insurance policy if you pay off your mortgage while the policy is still in place.

Age Restrictions

Like other types of life insurance, Mortgage life insurance may become unavailable after a particular age. Some insurers provide 30-year mortgage life insurance to applicants aged 45 and under but only 15-year coverage to those aged 60 and under.

To conclude, Mortgage life insurance promoters persuade you to add their product to existing life insurance coverage by convincing you that benefits will be eaten up by mortgage payments, putting your loved ones in a financial bind. However, simply purchasing more life insurance is a better solution.

Those concerned about leaving their loved ones with pricey mortgages can seek term life insurance, which is often a better option than mortgage protection life insurance.

If you want to purchase life insurance to cover your mortgage, your health will determine if mortgage life insurance is the correct coverage for you. With term life insurance, young homeowners with few medical difficulties will get better premiums and more coverage alternatives. However, if you have serious health issues and cannot qualify for term life insurance, mortgage life insurance will provide greater death benefits than many other options.

FAQs on Mortgage Life Insurance UAE

  1. Is Mortgage Life Insurance mandatory in UAE?

While some solicitations about buying a mortgage life insurance are addressed as official documents demanding urgency, it is absolutely not mandatory to buy one.

  1. Is Mortgage Life Insurance the same as Private Mortgage Insurance?

No, People who take up a mortgage for less than 80% of the value of their house are frequently compelled to purchase PMI.

  1. When does a Mortgage Life Insurance pay the mortgage?

The Mortgage Life Insurance policy only pays out if the borrower dies while the mortgage is still in place and the mortgage lender is the beneficiary.