Here, in this post, you will get the much-needed clarity to successfully attain loan against property or equity release in Dubai.
When looking for a loan against property in Dubai, you need to have an eye to compare multiple loan offerings to find the cheapest option that matches your requirements. You need to consider a variety of factors such as interest rates, your credit score and others to pick the right option.
There are various options and providers of loan against property. This can lead to confusion regarding the right selection.
What is LAP or Loan against Property?
When attaining a loan against property, you use your house or any other property as a mortgage. A loan provider evaluates the value of your property to decide the loan amount that you can attain.
A particular percentage of your property’s market value is given to you as a loan. The percentage amount can differ from banks to banks.
Getting this type of loan makes your property collateral, which means that your lender holds the right to conduct a property auction if you fail to pay back your loan. This makes loan evaluation extremely important before choosing a provider.
Reasons why people tend to get a loan against property in Dubai
There can be many reasons why people decide to get a loan against their property. Generally, these reasons make such loans effective for a person:
1. Ability to fund your kid’s education
Many people utilize the value of their property by using it as a mortgage to pay for their kid’s education.
A property loan offers a chance of attaining lower interest rates as compared to the interest rates on education loans.
2. Expanding your business
If you are trying to set up your own business, you know the importance of investment. A business requires investment to get bigger and offer more revenue.
Many people decide to utilize their property as a mortgage, so they can fund their business independently. However, it is important to carefully evaluate the chances of success and associated risks of your business plan.
If anything goes wrong, you have to pay the loan back on your own without getting any aid from business revenue.
Similarly, there can be other personal as well as professional reasons to leverage the market value of your property with a loan.
No matter what your reasons are, it is important to create a thorough plan around that reason, to ensure the security of your property.
Benefits of using a loan against property in Dubai
In Dubai, there are multiple choices of loan providers ready to offer loan against your property. These open gates for property owners with a variety of benefits.
1. Low interest rates
In this type of loan, your property works as collateral, which gives you an opportunity to attain a higher loan amount at a low-interest rate.
The interest rates on these types of loans usually stay considerably lower than personal loan options. However, there is still a wide range of diversity in terms of interest rates
offered by loan providers in Dubai.
Hence, loan product comparison becomes an important aspect of research for you.
Related: Best Mortgage rates in UAE 2019
2. Easy to attain
Due to the use of property as collateral, this type of loan comes within secured loans. Hence, there is a broad range of lenders available to offer these loans. So, the availability of a loan provider doesn’t become a problem.
3. Longer tenure
The tenure of paying your loan back becomes includes multiple choices depending on the lender you select.
Generally, these loan tenures can be around 5-25 years or so. The longer tenure makes repayment way more comfortable than other kinds of loans. However, the tenure factor depends on your loan provider.
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4. Reduced EMI
As the tenure of a loan increases, the monthly EMI decreases. The opposite condition is also true. With longer tenure, you get to enjoy a convenient EMI to repay your loan.
This resolves the chances of putting too much pressure on your financial condition as a whole. You can find a balance of tenure and EMI to keep the best-suited repayment plan.
What type of property can you utilize to gain a loan?
It has to be your own property if you want to get a loan against it. You can utilize your self-occupied home or rented property to attain this kind of loan. The lenders also accept a land piece that comes within your ownership. But it is critically important to utilize a property that has no other mortgage burden.
What makes you eligible for a loan against property in Dubai?
A lender of a loan against property Dubai can consider these factors to decide your eligibility:
1. The credit score you have
One of the biggest eligibility factors for loan acquisition is your credit score. However, many people think that credit score is important only for an unsecured loan. However, that is not true.
Many loan providers consider your credit score before deciding to offer a secure loan as well. Your credit score tells lenders about your history of loan repayment.
Hence, with a high credit score, you become eligible for a loan easily. Similarly, a bad credit score can lead to complications when trying to acquire a loan against your property.
2. The source of income you have
Your property works as collateral, but most banks and other lenders evaluate your source of income as well. This is to make sure that you have enough financial stability to repay your loan in terms of monthly installments.
In some cases, not having necessary income can lead to loan cancellation, even if you have a high-value property, which is why you should pick your EMI aligned with your overall monthly income.
Also Read : Complete Guide on Mortgage in Dubai
3. The validity of property ownership
You have to present all the necessary documents to prove the authenticity of your ownership. This is highly important in the case of using your property as collateral.
The property documents such as the title deed, building plan, registration, and approval documents from relevant authorities matter too.
There should be no legal complication associated with your property. Before submitting the documents, it is necessary to ensure that your name is there as the property owner or property co-owner.
4. The tenure you aim for
The tenure of a loan is definitely flexible in these types of loans. But, you can’t blindly select a too short tenure, as it can lead to loan rejection.
You need to understand the conditions related to the income you have and the tenure you want to attain. If your monthly income is low, it is better to try attaining longer
loan tenure. Commonly, loan tenure can go up to 15 years of time in Dubai.
5. Your age as the borrower
There are age-related limitations associated with long against property in Dubai. Young eligible people get loan approval easier than older people. At the same time, the tenure options also become limited, depending on how old a borrower is.
So, a person with the age of 55 years needs to repay his or her loan in a short span of time. Which is why the factors age, tenure, and income are all combined together to decide the comprehensive eligibility of a borrower.
6. Your job history
The ability to get loan approval gets partially affected by the history of your job. The stability of your industry, nature of job such as self-employed or professional and other factors are considered by several banks.
The sustainability of your job also matters. So, if you have changed your jobs very frequently in the past, it can put a dent in your loan application. All in all, a stable career increases the strength of your ability to gain loan approval.
7. Availability of your property insurance
The presence of property insurance strengthens your ability to acquire a loan against it. The insurance allows a lender to feel secure about the condition of your property and its value in case of any unforeseen situation.
The insurance also protects your own family from any unforeseen burden of loan repayment. Having insurance also assists in negotiating better interest rates.
8. Previous loan applications
Some lenders look at the history of your loan applications. Any rejected loan puts a red remark on your profile, which can make current loan approval difficult. Hence, you should discuss previous loan applications and their situations with a lender in advance to find effective solutions.
Getting a loan against your property is easy in Dubai. The factors of eligibility are there to help you acquire the right loan without putting too much effort.
You don’t have to invest a lot of time if you have a systematic plan and proper guidance. Simply clarify your reason for getting a loan against your home or any other property.
Then, use that reason to create a financial profile that would support your eligibility.
This way, you can attain the best-suited loan at a perfect interest rate for a reasonable repayment period.