FAQS: Mortgage loan in UAE

Posted by Mashreq Mortgage on February 28th, 2020

This is quite obvious that everyone wants to have his or her own home irrespective of any part of the world. The same is the situation in the UAE where more than 80 percent of UAE residents have a desire to buy their own house. Most people have a plan to get this project done within the next five years. Unless there is a large number of liquid assets or savings are required to meet this dream come true, the only easy way is to approach a bank through home loans in Dubai. Keep one thing in your mind that to materialize this dream, you ultimately have gone through a hard time. If you are planning for such tasks, here are the key features below to look out for when choosing a mortgage.

1.       Interest rates on a certain mortgage loan type
2.       Loan amount required for a specific mortgage plan
3.       What do you think about your pre-approval details?
4.       How much one has to pay for the down payment?
5.       What are the prepayment charges?

We will discuss the complete things regarding mortgage loans but one by one. First of all, let’s have a look at the interest rate that needs to be checked prior to shortlisting the mortgage. Keep one thing in your mind that if you could get the lowest interest rate, only then you can survive through this plan. If you do not understand how the interest rates are applied, it will be very defective for your savings and the fear of the unknown rate will always haunt you. Usually, loans have either fixed or variable rates of interest. One can also get this service using a combination of both systems.

If we talk about the fixed-rate, it remains constant until the end of the tenure, while on the other hand, the variable-rate keeps fluctuating according to the time period. The variable rates are determined by EIBOR which is very important for all borrowers. We know that most of the user’s don’t have any idea about these terms because it was introduced after 2009. You need to know that previously, mortgages interest rates were up to 5 percent but it can vary in 2020. After EIBOR, there has been a drastic fall with rates and one can accommodate a loan package at around 2.5 percent. There is nothing fixed and these rates are unstable and tend to change day-to-day.

Loans with fixed interests enable better planning is useful for domestic projects like to get your own home in UAE. These fixed methods minimize risks, although you may end up paying more due to high-interest rate. While on the other hand loans with variable interests are quite different from the first one and grossly dependent on the economy as a whole. If you think that using a variable rate method there are high chances of paying less interest, I would say at the same time, there is also a mild risk associated with paying more. If you have a strong banking history, then in some products, banks charge a fixed interest rate for a certain period and then shift to variable rates thereafter if needed.

The second most important thing is the loan amount. It varies according to the status of a customer and I would say depends on factors like:

1.       The applicant’s minimum monthly salary and in which company he or she is working for. Most of the banks consider these conditions with more clarity.
2.       Other than this a borrower is judged with nationality, type of property, and how long he or she is staying in UEA, etc.
3.       Your credit history is also another important factor that determines either you would get a loan or not. If you have a good credit score, it’s pretty easy to get a required amount of loan even on lowest interest rate while on the other hand if someone has a bad credit history, first it would be difficult to convince a lender for loan, and if it is ok then you have to deal with the interest rate issue.

If we look at the past track records of Banks in UAE, usually they don’t approve the entire loan amount in the first terms. As we have mentioned above, a crucial determining factor is the borrower’s debt-to-burden ratio, which determines your position. You don’t need to worry about anything if your reports reflect a certain financial discipline and responsible repayments record. With this kind of track record, it’s easier to seek a mortgage loan in UAE with the maximum amount.

Moving towards the lender’s choice, I would recommend you to go for the most reliable one. In case you have to manage more interest rates on your loan amount even then you should choose some reliable and credible sources. After all, this is a matter of direct money involved with a longer time, you should not take any risk. Also, you need to check out your Pre-approval details for a loan package. If you could manage to obtain a pre-approval guarantee, it would help provide confidence to the property seller to manage the contract. Financial institutions like banks or other private firms provide the pre-approval details on the request of a customer.

Keep one thing in your mind that this approval is only provided after a thorough validation of your application. We all know that some of the services are free of cost but the situation can be different while considering these reports. Some of the banks can provide you approval details free of cost, while a few charges a fee.

Remarks

What do you think about the best mortgage loan in Dubai? This is my last question from the readers. The above-mentioned discussion is related to point out the important terms and requirements. But this question is purely related to the bank which can offer the best rates. To make it easy for you, I would recommend Mashreq bank for the best loan offers available for residents as well as for expatriates.