• Mortgages for Buying Residential Property

    Mortgages for Buying Residential Property

    With the UAE gaining popularity as a financial safe haven, more and more people are shifting base to the country. This has led to an increase in the demand for residential properties by both residents and expatriates. While moving to a new place may be easy, getting ready to buy a house is not so easy. There are procedures that need to be followed and loans that need to be taken. If you do go in for a home loan, there are some things that you need to know before you apply for a loan.

    Features of Home Loan for Residential Property

    There are numerous banks and financial organisations that offer mortgages for buying residential properties. Each one has something unique to offer their customers but there are some common feature every home loan has that you need to know. These are:

    • Loan Amount: The amount that you can borrow depends on the cost of the project your own eligibility for the loan. Some banks will allow you to borrow up to AED 20 million. The loan amount can also be calculated by multiplying the monthly salary by 80 in the case of some banks.
    • Loan to Value Ratio: Most banks offer 80 to 85% of the amount needed for the project.
    • Down payments: Since banks will fund only up to 85% of the property, you will need to pay a down payment of at least 15% to 20%.
    • Interest rate: The interest rates depend on the bank you approach and the type of loan that you take. They can range from 2% per annum to 7% per annum.
    • The interest rates can either be variable or fixed, or a combination of the two where the first year’s interest rate will be fixed and thereafter it will be variable.
    • Tenures: The tenure for these loans can be as long as 25 years.
    • While most banks offer conventional home loans, some banks also offer mortgages that are compliant with the rules of Islamic banking.

    Eligibility Criteria and Documents Required

    In order to be able to avail a mortgage for a residential property in UAE, you need to fulfil certain conditions. These are:

    • Eligibility Criteria

      • Your age should be between 21 years and 70 years.
      • You must have a minimum monthly income defined by the bank. It can be as low as AED 10,000 a month too.
      • You must be either salaried or self-employed and you must have worked in the UAE for at least 1 year. This requirement may change from one bank to another.
    • Documents Required

      • In case you are a citizen of UAE then the national ID card is needed. For expatriates their passport will be required.
      • Expatriates will also need to provide a copy of their residence visa for the UAE.
      • You will also need to provide salary certificates.
      • Salary transfer certificates will be needed if it is a requirement that your salary be transferred to the bank offering the loan.
      • Property documents like deeds, sales agreements, designs, quotations from sellers, etc. may also be required.

    These are just some of the documents that are required for the processing of a home loan. If needed, the banks may ask you to submit additional documents as needed.

    Benefits of Mortgages for Residential Properties

    There are many benefits to taking a home loan. Some of these are:

    • These loans can be taken for residential properties being constructed by builders and those being bought from individuals.
    • Home loans allow for early settlements.
    • They are also available to UAE citizens and expatriates.

    Why BankBazaar?

    The biggest advantage of coming to BankBazaar, when it comes to taking home loans, is that the information that is provided by us is exactly what you need to get a clear understanding of how home loans can work. The information is also well researched and presented in a way that makes it easy to consume.

    Frequently Asked Questions - FAQs

    Q. What are variable interest rates?

    A. In some cases interest rates can change according to market situations. They can rise and fall and affect the interest that you pay on your home loans. These are variable interest rates.

    Q. What are fixed interest rates?

    A. These are the interest rates that are charged on home loans that are not subject to change throughout the tenure of the loans.

    Q. Which is better, variable or fixed interest rate?

    A. This is a question that cannot be answered with any definite. The advantage of the variable rate is that your interest can reduce if the rate comes down which is not possible with the fixed rate. The advantage of the fixed rate is that it will not go up as it can with variable interest rates. So the decision really rests on you and your appetite for risk is.

    Q. Are these loans Shari’a compliant?

    A. While most banks offer conventional loans, there are those that offer home loans that are sharia compliant.

    Q. Are the documents required the same for self-employed individuals?

    A. No. For self-employed individuals, extra documentation will be required. The banks will let you know what all they may require. These documents could include things like trade licenses, Chamber of Commerce registration certificates, financial audits, etc.

    Q. I don’t have the original documents. Will that be a problem?

    A. Yes. That could constitute a problem because the banks require the original documents to verify the copies that are submitted.

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