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- On September 29, 2015
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Getting a Mortgage in Dubai-With so many prime real estate locations in Dubai, it is easy to get carried away with selecting the perfect property to call home. However, before you fall in love with your dream home, consider how you intend paying for it. Although the mortgage market is nowhere as large as that in the UK, there are over 30 lenders in Dubai offering a variety of mortgage packages, so it is worth taking the time to find the best deal for your needs. It is advisable to get approval for your mortgage in principle before you start looking for property; else you might just fall in love with a home that you are in no position to bid for.
- Other financial commitments you may have at the time of application for the loan including credit card debts and limits – under Central bank laws, no more than 50% of your total income should be committed to paying off your debts including mortgage payments, credit cards, other loans etc.
- Current income and income type (full time, contract etc.)
- The loan amount compared to the value of the property you intend on purchasing
- Lifestyle factors such as number of dependants etc.
- Type of loan requested
- General living expenses
- Current savings and other assets
Some of the terminology you will come across in your mortgage application is explained below; it is important to understand these terms so that you know the terms and conditions of your mortgage. This will help you to decide on the best deal for you and will also help you with future budgeting.
Early Repayment Charge (ERC): This is a penalty imposed by lenders on borrowers who wish to pay back the loan amount before the agreed term of loan payment. ERC varies based on whether the mortgage is a fixed or variable interest rate loan.
Loan-to-Value Ratio (LTV): The LTV is the amount of money borrowed relative to the value of the property. If the LTV is 80%, this means that the borrower will be making a down payment of 20% and has applied for a mortgage loan of 80% of the value of the property.
Equity Release: Equity is nothing but the difference between the value of your property and what you owe on it. As you make payments, the amount you owe on the property begins to decrease and you can build up equity in your property; the same is true if the value of the property rises from the time you purchased it. Many lenders will allow borrowers to use this equity for further borrowing purposes; therefore depending on your financial circumstances, equity in your home can be released to finance other requirements such as buying a car or building up an investment portfolio. Equity release is a great way of getting money out of the property you own.
Re-mortgaging: Re-mortgaging refers to a change in lender during the term of your loan; a borrower might decide to change lenders to avail of more attractive promotion rates or loan options. However it is worth considering the current relationship you have with your lending institution; if you enjoy a good relationship with your lending institution, moving to a new lender will mean having to build up that trust all over again. The benefits of changing lenders may also be minimized once you take into consideration any early repayment charges or processing fees.