Introduction to the Mortgages for First Time Buyers
Buying the first house always comes with a mix of excitement and trepidation. It is a huge expense and a massive commitment to get involved with, and more so if this is the first time you are taking out a mortgage to finance your house. If this is a mortgage for a first time buyer then there are certain things you will need to know about it before you can proceed.
Features of a Mortgage
Since there are numerous banks and financial organisations that offer home loans, each loan comes with its own set of features but these are some of the most salient features.
- Loan Amounts: The loan amount depends on the bank you approach but it could range from AED 7 million to AED 20 million or even more.
- Interest Rates: The interest rates also depend on the bank you approach and the time at which you take the loan. They can range from 2.9% per annum to 7% per annum in the case of conventional home loans. If the home loan is offered under the rules of Islamic banking then there will be no interest charged.
- Payment Tenures: The tenures for such loans can range from 3 years to 25 years.
- These mortgages are available from international banks, as conventional mortgages and also as mortgages following the rules of Islamic banking.
- Loan to Value Ratio: Most banks will offer up to 80% of the finance required while some banks may even offer up to 85% of the finance.
Eligibility Criteria & Documents Required
Before anyone can take a home loan, there are some eligibility criteria that need to meet and some paperwork that needs to be completed. These are:
- You will need to have a minimum monthly income defined by the bank. This could range from AED 10,000 a month to AED 50,000 a month, or more, depending on the banks policies.
- The minimum and maximum ages for availing this loan could range from 21 years to 70 years.
- You will either have to be salaried or self-employed. For both applicants there may also be a clause about having worked in the country for a specific number of years.
- If you are a UAE national then you will need to have a national ID (Khulasat Al Qaid).
- You will need salary certificates and letters of salary transfer if the banks require salary transfers.
- Property documents like quotes from seller's, agreement of sale and deeds to the property will also be required.
- Other documents like approved drawings, details of down payments made, building permits, etc. may also be required.
Benefits of a Home Loan
The biggest benefit of a mortgage is the obvious one of having the money to pay for your dream house but there are some other benefits too; which are:
- Home loans can be taken for residential properties or commercial properties.
- They can also be taken for purchasing a property that is constructed or is still under construction.
- It is also available for purchase of property from an individual.
- The loans can be settled early by paying an early settlement fee.
- With some banks you can avail a top-up loan on the existing mortgage.
If you were to go looking for information about home loan in UAE on your own, chances are that you will end up spending a lot of time and gaining very little knowledge in return. The advantage you have with BankBazaar is that the information you need is easily accessible and allows you to compare multiple mortgages easily.
Frequently Asked Questions - FAQs
Q. Is there a processing fee for these loans?
A. Yes. Most bank will charge a processing fee of about 1% of the loan amount. In some cases this fee can be waived off if the loan is being taken under a special offer from the banks.
Q. Are these loans compliant with Islamic banking?
A. You have a choice between conventional loans and those that are compliant with the rules of Islamic banking. If you are specific about Islamic banking then you can approach banks that offer such products.
Q. Is a salary transfer mandatory?
A. The requirement of a salary transfer to the bank you are taking the loan from is not a hard and fast rule. It is a facility that is provided at the bank’s discretion, which means that some banks will offer home loans even without salary transfers.
Q. How much down payment will I have to pay?
A. Since most banks offer 80% to 85% of the finance needed, you will have to pay 15% to 20% of the money as down payment.
Q. What is the best tenure for a home loan?
A. The best tenure depends on various factors. For example, you may think that going in for the full 25 year tenure is a good idea but if you calculate the interest, it might turn out that a shorter tenure will have you pay lesser interest. The best thing to do is to understand the EMI and the interest you will have to pay for the chosen loan amount before agreeing to a tenure.