Navigating your way through the various terms, conditions and industry jargon of the UK’s banking institutions when looking for a mortgage bank loan can be a complicated, confusing affair.
But, when trying to fathom the rules and procedures at play in a foreign country, securing a mortgage can be a doubly stressful and frustrating experience.
If you’re relocating to the UAE and want to purchase your accommodation instead of rent it, then here are the latest bank loan developments that expat mortgagees should be aware of:
Paying a Deposit
There are slightly different rules for Emiratis and expats when it comes to securing property with a deposit. When looking at any financial product, whether it be a mortgage, personal loan or credit card, always check that the terms apply to you and your expat status.
If you want to buy a property costing Dh5 million or less with a mortgage, you will need a minimum 25% deposit to be considered. Properties valued at more than Dh5m will require a 35% deposit and for second homes the minimum deposit amount is 40% regardless of the property’s value.
Monthly Repayments
In the UK, if for some reason you have a shortfall of funds and temporarily can’t cover the cost of a mortgage payment or deposit, it’s possible to use a personal loan or credit card to see you through but in the UAE this is not permissible.
The Central Bank stipulates that any “monthly payment must be made from salary, or income from work that can be verified or rental income” and you will need to provide evidence of this, usually by having a salary paid into the bank which approves your mortgage.
Any bank loans you do secure must be repaid within 25 years or when the borrower reaches the age of 65.
Transfer Fees
In 2013, the Dubai Land Department doubled transfer fees, the amount paid by buyers and sellers on the transfer of property ownership from one person to another, from 2% to 4%.
The aim was to limit the number of properties being bought by investors who ‘flipped’ them and sold them on quickly for a profit; if you’re planning to purchase property in the UAE as a landlord or investor then these costs should be factored in to your decision making.
Early Repayment Charges
Previously, borrowers who wanted to repay a bank loanearly had to pay a fine to their lender of approximately 4% of the remaining loan balance. However the Central Bank of the UAE has now fixed “early repayment charges for mortgages at 1 per cent of the outstanding amount or Dh10,000, whichever is lower.”
Whether you’re already in the UAE and actively looking for a bank loan for property, or are just weighing up your options before arriving in the region it’s wise to do your research thoroughly.
Keep up to date with developments in the financial market by checking the UAE Central Bank website as well as impartial comparison sites like Souqalmal or Bayzat which are regularly updated with the latest news, rates and financial UAE offers.
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