Do your research! Be sure to compare your options when choosing a mortgage
Expatriates in the UAE must self-fund at least 25 per cent of their first property. (AFP/File)
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Despite apartment sale prices in Dubai going down by 3.6 per cent from April 2014 to April 2015 and villa prices dropping by 3.7 per cent over the same period, the majority of UAE residents are still opting to pay the increasing rental prices rather than getting on the property ladder.
In fact, a survey carried out by compareit4me.com recently found that 67 per cent of UAE residents don't own a property in the region, with 76 per cent admitting they would like to buy but are put off by various factors, among them house prices.
However, considering mortgage rates are currently low in the region, with banks including Mashreq, HSBC, Standard Chartered and Commercial Bank of Dubai offering mortgage flat rates as low as 1.6 per cent, now is a great time for residents to get on the ladder.
Not only is owning a home a valuable asset, as long as the value increases with time, but it's also a form of security. It is also probably one of, if not the, most important financial decisions a person will make in their life and for most people a mortgage is required to make the process possible.
Selecting a mortgage (also known as home finance), however, requires patience and a lot of research. There are so many options available, so anyone looking to get a mortgage should compare, compare, compare.
Rates are incredibly important when considering which mortgage to select. In fact, the same survey carried out by compareit4me found 49 per cent of respondents consider rate to be the most important factor in the home loan selection process. However, in addition, there are other key factors which need to be considered.
In the first instance, using a mortgage calculator, found on compareit4me.com, allows any potential home owner to calculate exactly what their monthly payments will be, along with the fees they will encounter. By inserting the amounts for home price, down payment, interest rate and loan term, the calculator will produce a guestimate monthly payment. This is the perfect way for users to know what their budget is, before they set about finding their new property.
With a realistic budget set, it's important then that the regulatory norms for home financing are read and understood to ensure no last-minute finds.
For first-time property buyers, the maximum finance-to-value an expatriate in the UAE can avail is 75 per cent for a property, which has a sale price of less than Dh5 million, or 65 per cent for properties exceeding Dh5 million. This means that a minimum of 25 per cent has to be self funded for a first property, while the minimum deposit for a second property is 40 per cent.
There are also other charges which need to be considered if the property is being registered at the statutory body, such as the four per cent registration charges on the price of the property; 0.25 per cent of your finance value, and real estate broker charges of two per cent.
It's vital that anyone seeking funds to purchase a property should compare all of the offers on the market to ensure they benefit from the most lucrative deal. Research the profit rate to ensure the rates attached to the loan are understood, the processing fee (these can be as much as one per cent), exit charges - in case the individual wants to exit the mortgage earlier than initially agreed, valuation fees and insurance charges. Insurances, both for life of the individual and the property in question, are a mandatory requirement with the majority of financial institutions. Charges are in the range of Dh4,000 to Dh5,000 per month per Dh1 million, and can be paid on an annual or monthly basis.
Finally, when the right home finance provider and offer has been found, it's crucial that the time it's going to take the bank to appraise the individual and complete the finance form completely is considered. It's sometimes the case where the individual has signed an MoU with the property seller but hasn't actually finished securing the finance. The speed of paperwork completion, therefore, becomes crucial. The average time taken to get final approval can vary from one week up to two weeks, so this time needs to be allowed for.
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