Mortgage Advisory
There are many reasons why people are attracted to mortgage financing in the United Arab Emirates. First, the UAE is tax-free, with a stable economy and strong currency. Additionally, the UAE offers a wide variety of mortgage products and services, which makes it an attractive option for those looking to finance their home.
Mortgage financing in the UAE can be used to purchase a primary residence, a second home, or an investment property. Various mortgage products are available, including fixed-rate mortgages, adjustable-rate mortgages, and interest-only mortgages. Mortgage financing in the UAE is also available for multiple terms, including short-term, medium-term, and long-term loans.
What is a Mortgage Loan?
A mortgage loan is a loan secured by a property – typically, a residential property – that the borrower is obliged to pay back, usually for years. The interest rate on a mortgage loan is generally lower than the interest rate on other types of loans, such as personal loans or credit cards, because the lender knows that if the borrower defaults, they can sell the property to recoup their money.
Types of Mortgages
Many different types of mortgage products are available in the UAE, each with its own benefits. The most popular types of mortgages in the UAE are:
Fixed-rate mortgages: offer stability and certainty, as the interest rate is fixed for the entire loan term. However, borrowers may pay more interest if rates fall during the loan term.
Variable rate mortgages: These products offer more flexibility, as the interest rate can fluctuate over the loan term. This means that borrowers could end up paying less in interest if rates fall, but they could also pay more if rates rise.
Tracker mortgages: These products track the movements of the UAE Central Bank’s benchmark interest rate. This means that borrowers will always know how much their monthly repayments will be, as they will fluctuate in line with changes in the benchmark rate. However, tracker mortgages typically have higher interest rates than fixed or variable-rate products.
Islamic mortgages: These products comply with Sharia law and are therefore popular with Muslim borrowers. Islamic mortgages typically involve the concept of “murabahah”, where the lender buys the property on behalf of the borrower and then sells it to the borrower at an agreed-upon price, plus a profit margin.
Offset mortgages: These products allow borrowers to offset their savings against their mortgage balance, which can help to reduce the amount of interest paid over the life of the loan. However, offset mortgages typically have higher interest rates than other types of mortgages.
Key Terms of Mortgage Finance
Understanding key terms can help you better understand the mortgage loan and its processes. Let’s take a brief look at each of these terms:
House Loan Calculator
Property Mortgage Calculator is often referred to as House Loan Calculator. It helps you determine the price of your desired property as per your loan period, interest, and down payment.
Price
During the mortgage process, the term “price” always refers to the property’s value in consideration.
Down Payment
It is the amount that the loan applicant has to pay upfront to acquire the property. The required down payment generally is 15% or more for UAE nationals and 20% or above for expats.
Mortgage Amount
The mortgage amount is the total loan that the financial institution or developer sanctions. For UAE nationals, the mortgage amount can go up to 85% of the property price, while for expats, the maximum loan percentage is 80%.
Interest Rate
Interest rate, or mortgage rate, is the percentage of interest charged against the mortgage amount.
Loan Term
The loan term refers to the total number of years the loan has to be repaid. It can also be understood as the life of the loan. In the UAE, financial institutions offer loan terms of up to 25 or 30 years.
EMI
They are also called monthly mortgage payments, installments, or just monthly payments. This refers to the amount you have to pay each month and includes the principal amount, interest, and in many cases, property tax and insurance premiums.
Terms and Conditions for Mortgage Loan
The Terms and Conditions for Mortgage Loan in the UAE are as follows:
- The mortgage loan must be used for the purchase of a property in the UAE.
- The loan must be repaid within a maximum period of 25 years.
- The loan must be repaid in full if the property is sold or transferred to another person.
- The interest rate on the loan is fixed for the duration of the loan period.
- The loan must be repaid in full if the borrower dies or is declared bankrupt.
- The lender has the right to repossess the property if the borrower fails to repay the loan