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A Quick Read On The Available Mortgage Options in Dubai


Dubai is like a paradise for people searching for a life of luxury in a contemporary and highly developed city. Professional people relocate to Dubai for career growth; moreover, it is an excellent place for families as well, with loads of different activities for everyone. If a person plans on living here for an extended period, he/she may be tempted to purchase a house to match his/her individual needs. Luckily this is possible for an expat, and mortgage givers are well trained to tackle foreigners' mortgage applications, whether they're searching for an investment or a family house. Whatever the reason may be for searching for property in Dubai, a person must know and understand the kinds of mortgages available, and the process involved in acquiring one. Here is a guide on mortgages in Dubai.


Types of mortgages in Dubai

The mortgage market in this city-state is very lucrative. There is a vast range of mortgage providers, from international brands to the more localized firms. Due to the overwhelming choices available, a person must do some prior research to know how the different institutions operate, to make an informed decision on which one suits his/her needs perfectly. Expats can apply for mortgages in Dubai, be it for a home if they plan to stay, or as an investment. Depending on one's situation and the kind of property he/she intends to purchase, the deposit amount one is asked to pay will vary. Generally if a person is searching for an investment property, he/she is viewed as a more significant risk, and as a result, the bank will ask for a higher initial deposit. Foreigners purchasing an investment property are usually required to pay a down payment of 40 percent of the property value upfront - and the price rises to 50 percent if one is purchasing an off plan. On the other hand, if a person wants to buy a house to live in, the down payment is usually in the 25 percent range. The amount of mortgage that a person can be given legally has some restrictions. As a foreign buyer, the total amount needed for repayment - which includes the principal and the interest - cannot exceed the total amount one is forecasted to gain in 7 years time.

Primarily, a person must decide on whether he/she is interested in a fixed or variable rate mortgage agreement. Fixed rate products guarantee that a constant interest will be used for the duration of the contract. This is generally in the range of around five years, after which the system will reset to a rate given by the involved bank. The fixed price is not always the best option available. Therefore it is wise for a person to have knowledge of the small print and know if there exists a more suitable offer post the duration of the fixed rate. An alternative option is to apply for a variable rate mortgage. Variable rate products tend to cost more or less than the fixed rate ones depending on the changes in the interest rates. They are a suitable option if one thinks that the prices will decrease during the duration of his/her loan.

There's a possibility of getting an "interest repayment only" type of mortgage, but the duration of this will not exceed five years. Different products are offered by varying banks and brokers, and not all willing customers have access to all of the available options. There exist "specialist" mortgages for new purchasers or investors, for instance, which may not match a person's needs as a foreign buyer. One will usually need to use specialist advice to assist him/her in understanding all of the products available in the market.


Is it better to go directly to a bank or seek a broker?

A person can opt to arrange his/her mortgage directly with a financial institution, or use a broker to help him/her do so. In some situations, for instance, where a person is not sure of their eligibility for a loan, it may be wise to use professional advice from a licensed mortgage broker. This is necessary if one is new to the Dubai property system and unfamiliar with the mortgage options or laws.


Legal requirements for acquiring a mortgage in Dubai as an expat

In 2002, there was a change in the Dubai law. Expats were now allowed to purchase Dubai property and apply for mortgages loans legally. When dealing with mortgages, different banks will make their terms, and not all of them will be suitable for expat buyers because of a notion that foreign buyers involve added risk to the bank. As a result, the banks which do deal with expat buyers insist on investors paying significant deposits before purchasing the property.


How can an expat acquire a mortgage in Dubai

The options available to a person for acquiring a mortgage in the city-state depend on a person's situation, and the price of the property one wishes to invest. Offers are different. Therefore it is wise to talk to some banks or brokers to know what options are available.


The type of documents needed will depend on the bank that a person uses. Here are common types of paperwork that are usually required:

•    A Copy of personal identification papers like passports.

•    Proof of being a legal Dubai resident and the current home address.

•    Documents to prove a person's creditworthiness.

•    Papers to show the affordability of the loan.


Some of the charges involved when applying for a mortgage in Dubai include:

•   A mortgage registration charge: usually a small percent of the price of the mortgage.

• Bank fees (processing charge, property evaluation charges, and insurance registration charges).

•   Mortgage life insurance.

Depending on the situation, there may be additional costs involved.



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