• Mortgage Repayment options in the UAE

    Before you take a mortgage loan, you must learn about the various repayment options that are available to you. This can help you ascertain your future cash outflows. When you can ascertain the cash outflow you can make arrangements to accommodate them in the right way. Your mortgage repayments consist of the principal amount and the interest. The principal amount is the original loan amount and the interest is charged on the money lent to you by the bank.

    You can opt for fixed or variable rate of interest. If you have chosen fixed rate of interest, the interest amount will remain the same throughout the term of the loan. If you choose the variable interest rate, the rate keeps fluctuating depending on the market factors. Following are the various repayment options available to you in the UAE:

    Repayment mortgage

    This is the most common type of repayment method. You must repay the amount of the principal and the interest each month for the entire mortgage term. The amount of the mortgage loan reduces every month as you keep paying. The initial repayments consists a larger component of interest. Towards the end of the mortgage term, you will be paying off a huge chunk of principal amount and a small amount of interest. The mortgages in the UAE lasts for 25 years. The tenure depends on your age, occupation, and nationality.

    Interest only mortgage

    In this option, you have to pay back interest for the initial period and not make any payment towards the principal amount. The initial repayments will be less as it only consists the interest component. After the end of this period, you will start paying towards your principal amount. This option is offered for a maximum tenure of 5 years. This approach is risky as there is a good chance you might end up re-mortgaging the property with an alternate lender. Most of the people who opt for this option do not have any intentions of clearing out the capital, they will keep re-mortgaging and paying only the interest. The re-mortgaging cycle continues till the property prices rise. Once the prices are up, the property is sold and the owner moves into a smaller place with what is left after clearing off the mortgage loan.

    Checkout what is Interest Only Mortgages

    Part repayment and part interest mortgage

    This option combines repayment and interest only mortgage. If you have chosen this option, you will still owe a part of the principal amount towards the end of the mortgage term. The terms will vary depending on the lender. Most often the lender will require you to get a loan protection on your mortgage. This protects the bank as the loan will be paid off in the event of your death. Most insurance companies provide the option to cover for terminal illness and disability as well.

    Before you take a mortgage, you must understand the mortgage repayment options thoroughly. You can meet with the bank representative and choose the right repayment option for yourself.

    Mortgage loans offered in the UAE

    Following are the various mortgage loans offered in the UAE:

    • ADCB Mortgage for UAE National:
      • Down payment – 20%
      • Maximum finance amount – AED10 million
      • Maximum tenure – 25 years
      • Fixed interest rate – 2.20%
      • Minimum salary – AED8,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 1%
    • Mashreq Islamic Home Loan – Self-employed UAE Nationals:
      • Down payment – 20%
      • Maximum finance amount – AED15 million
      • Maximum tenure – 25 years
      • Fixed interest rate – 2.20%
      • Minimum salary – AED15,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 1%
    • DIB Al Islami Home Finance for Expats:
      • Down payment – 25%
      • Maximum finance amount – AED15 million
      • Maximum tenure – 25 years
      • Fixed interest rate – 2.20%
      • Minimum salary – AED12,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 1%
    • RAKBANK Amal Home Finance:
      • Down payment – 20%
      • Maximum finance amount – AED13 million
      • Maximum tenure – 25 years
      • Fixed interest rate – 2.20%
      • Minimum salary – AED15,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 1%
    • HSBC Granted Land Loan for UAE Nationals:
      • Down payment – 25%
      • Maximum finance amount – AED4 million
      • Maximum tenure – 25 years
      • Fixed interest rate – 4.41%
      • Minimum salary – AED20,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 0%
    • ADCB Home loan for Self-employed UAE Nationals:
      • Down payment – 30%
      • Maximum finance amount – AED10 million
      • Maximum tenure – NA
      • Fixed interest rate – 2.20%
      • Minimum salary – AED10,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 1%
    • CBI Home loan:
      • Down payment – 25%
      • Maximum finance amount – Variable
      • Maximum tenure – 25 years
      • Fixed interest rate – 2.07%
      • Minimum salary – AED15,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 2%
    • HSBC Home loans for UAE Nationals:
      • Down payment – 20%
      • Maximum finance amount – Variable
      • Maximum tenure – 25 years
      • Fixed interest rate – 2.20%
      • Minimum salary – AED15,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 1%
    • ADCB Home loan for Self-employed Expats:
      • Down payment – 30%
      • Maximum finance amount – AED10 million
      • Maximum tenure – NA
      • Fixed interest rate – 3.80%
      • Minimum salary AED20,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 1%
    • EIB Binaa Home Finance HomeLease:
      • Down payment – 20%
      • Maximum finance amount – AED10 million
      • Maximum tenure – NA
      • Fixed interest rate – 2.48%
      • Minimum salary – AED8,000
      • Processing fee – 1% of the amount.
      • Settlement fee – 1%

    Before taking a mortgage, ensure that you know the repayment option that you are most comfortable with and one that suits your lifestyle. You must also now if there is a need for you transfer your salary to the bank offering a mortgage. Read through the terms and conditions of the mortgage so that you are not in for a surprise. It is advisable to know the various fees and charges applicable. If you have any queries, you must get them resolved with the bank representative. Compare the various mortgage loan offered by various providers and choose the one that best suits your lifestyle.

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