Home finance is the first step to achieving your dreams of property ownership, but all too often, UAE residents are hindered by the belief that buying a home and dealing with banks is a cumbersome process. In fact, not only can you finance up to 85% of the property’s value, depending on select factors, but doing so is relatively straightforward.
That said, anyone who takes out
home finance in the UAE should do their homework. A little preparation and a helicopter understanding of the process can go a long way. Reflect on the following points if you’re looking for home finance in the UAE.
UAE nationals and Expatriates are eligible for home finance in the UAE subject to them meeting the banks eligibility criteria including a minimum monthly income threshold. Banks will also check for a minimum length of service, your age, your income to liabilities ratio and credit score. Self Employed individuals would also need to meet criteria on minimum length of business and annual turnover. Other eligibility criteria may differ from bank to bank.
As far as Expatriates are concerned, the following are few essential points that need to be kept in mind before applying for a home finance.
Before you can buy a home with bank finance, you’ll need a letter from the bank confirming that they have pre-approved you for the facility. This approval in principle, often called pre-approval, assures the seller that the sale will proceed smoothly and that matters can be concluded quickly. A letter of this kind is generally valid for 60 days and is normally provided with no additional charges. Having pre-approval in place also helps you decide on your purchase price as it provides you your maximum eligible finance amount.
Banks generally offer two types of profit rates on home finance in the UAE, fixed and variable. A fixed profit rate is set for a specified number of years, so you know for certain how much you need to pay and for how long. Variable profit rates, on the other hand, are linked to the 1-, 3- or 6-month Emirates Interbank Offered Rate (EIBOR) throughout their duration and change with the change in the EIBOR. Variable-rate finance allows you to take advantage of decreases in the EIBOR rate – but on the other hand, your profit rate could rise too. This is why a combination of a fixed and variable rate product is normally popular as it helps customers to manage their budgets better. Some customers though choose to go with a variable rate from the beginning, particularly if they believe that the financing rates will drop or stay stable for a few years on account of a forward view on the EIBOR.
All finance products come with additional charges that can impact your total outgoings. With home finance in the UAE, ask your bank about application fees, property valuation fees and arrangement fees. That’s in addition to the other fees associated with the property purchase – real estate agent fees, lands department charges and mortgage registration charges.
Given the long tenor of home finance – some banks allow you to schedule payments over a 25-year period – it’s worth considering how different UAE home finance products compare in terms of flexibility. Look beyond lower profit rates, low early repayment fees and so on. While it’s impossible to predict every eventuality, a little wiggle room can tide you through uncertain periods.