What you should know before securing a mortgage in dubai

Investing in a property in Dubai seems quite exciting, but it can be an equally daunting experience. A major step involved with purchasing a property revolves around securing a mortgage. With the right guidance, getting a mortgage in Dubai can be a smooth process.

4 tips for getting your mortgage in Dubai

1. Make Your Down Payment Ready

Before you set out to get a mortgage, you should know that you have to save a lot of money. You will have to think about the initial fees to be paid for getting a mortgage.

The initial fee includes 2% real estate commission, 0.25% for mortgage registration, 4% transfer fees, along with a loan establishment fee of around 1% approximately. The initial fees that need to be paid cover around 5% to 7% of the property’s total price. 

Before paying your down payment, you need to know that you have two options. You can settle for a fixed mortgage rate or a variable mortgage rate.

A fixed mortgage rate will mean that the interest rate will remain the same for a certain period of time. If you choose a variable mortgage rate, the interest rate will increase or decrease depending on the Emirates Interbank Offered Rate. 

Currently, the mortgage rates are around 3% to 5%. But the year 2022 will see a rise in mortgage rates. Therefore, buyers can consider shifting to a fixed rate mortgage. It will ensure that they can secure a low interest rate while the rate increases. But the longer a fixed rate is, the more expensive it will become. 

Buyers need to be careful about the revision rates. These are interest rates that the buyers need to pay after the period of fixed rate expires. The revision rates are often linked to 3, 6, or 12 month EIBOR and bank margin. Choosing a fixed rate period between 3 to 5 years can become beneficial in avoiding higher expenses in the long run.

2. Seek Pre-approval

Pre-approval is used to ensure that you fit within the bank’s criteria for borrowing the money. You can get pre-approval by going to the bank directly or by talking to a mortgage advisor. A mortgage advisor can get in touch with the bank to get your pre-approval arranged. Your mortgage advisor will discuss all the requirements for your mortgage with you. They will analyze your income and expenses to find the best route for seeking pre-approval. 

Buyers need to finalize their budget and obtain pre-approval from the bank before beginning their search for a suitable property. A sales agreement will need a down payment of 10%. If you begin the process of buying a property and get rejected by the bank, the 10% down payment needs to be forfeited.

Buyers also need to include a clause in the agreement that the purchase transaction will be subjected to the bank’s final approval. It is also subject to the bank’s property valuation at the agreed purchase price. It will ensure that the deposit money remains safe even if the bank rejects the mortgage. The bank might also think that the property is overvalued and does not provide the buyer with the full mortgage amount. Pre-approval ensures that you can look for properties without worrying about being unable to secure the finances.

3. Get Your Paperwork Done

A lot of paperwork is necessary to obtain a mortgage. It will vary from institution to institution. But you will have to provide a copy of your UAE ID, passport, and visa. You will also need to provide your salary certificate.

Payslips, bank statements, and credit card statements from the last six months must also be submitted. Residents of the country also need to show address proof. A copy of a tenancy agreement or a DEWA bill can serve as the address proof of a UAE resident. 

4. Contact A Mortgage Broker

A mortgage broker can understand the market and individual requirements of clients. They will help find the best mortgage deal for you with the bank that’s best for you. They will also help you make important decisions while getting a mortgage.

If you don’t understand the complicated terms and conditions of getting a mortgage, a broker will help in simplifying the terms. They can also help you figure out how much you can afford to pay and how much you will have to pay monthly for your mortgage. But you should get in touch with a trustworthy mortgage broker to make the process easier. You can talk to more than one mortgage broker before settling with one. 

Ending Note

Exaggerating your financial status to gain a mortgage will not be beneficial. Your mortgage application might get rejected for misrepresenting or not disclosing truthful information about your finances.