Buying a property can be an overwhelming experience. The many considerations attached to buying a property can get the better of many people. One of the major considerations is mortgage selection. Home mortgages enable a large pool of people to own a property. The practice is also rather common in Dubai – one of the fastest-growing cities in the world. Understanding the mortgage structure can be more than a handful during the home-buying process and more. We will do a detailed overview of the structure of mortgages in Dubai to give a better understanding of the process.
Structure of Mortgages in Dubai
Mortgages are long-term loans that help individuals purchase a property. Dubai, a global tourism and investment hub, has multiple mortgage institutions. Taking a new mortgage or buying mortgaged property in Dubai are both common practices in the emirate.
Moreover, interested individuals can choose from different mortgage types. All in all, mortgages are a viable option to avoid rental expenses and other related charges. However, it is a viable option to have sound knowledge of mortgage structure working in Dubai to ensure a hassle-free experience.
Let’s go through the structure of mortgages in Dubai to learn the ins and outs of the entire process.
MORTGAGE APPLICATION
Usually, people apply for a mortgage after they find a property. However, this is not the only option. It is possible to apply for a mortgage pre-approval in Dubai as well. This is a great way to narrow down property search as the financial stats are right there.
Moreover, it helps increase the credibility of a buyer. Also, buyers can make a swift offer if the mortgage is pre-approved. Furthermore, it helps to avoid urgency to find the right mortgage service when finding the ideal property.
MORTGAGE ADVISOR OR BANK
An experienced mortgage advisor presents all the available options. Home buyers can then choose from the list of available options. Moreover, these individuals can suggest the best option based on the individual’s financial situation. Go through this piece to decide if using a mortgage broker in Dubai is the right option.
Besides, buyers can always go directly to the bank. However, it is important to do prior research to select the most suitable option.
FINDING THE RIGHT HOME
A major step in understanding the structure of mortgages in Dubai is finding the right home. Ideally, it should be priced right i.e. according to the amount of loan one can get from the bank. For instance, most banks require an individual to have a salary of AED 15,000 to become eligible for a loan. Moreover, it is important to have at least a 20% down payment.
Furthermore, the terms for a luxury property mortgage in Dubai may vary compared to an affordable property. It is important to get the affairs in order to avoid mortgage rejection or miscommitment. Also, know the hidden cost of buying and owning a property in Dubai to plan better.
MORTGAGE PAYMENTS
Buyers should know the mortgage payment working in Dubai as well. Applicants can decide the loan tenure. It is usually up to a maximum of 25 years in the UAE. However, this can vary with banks. Additionally, it is important to know that applicants pay interest in addition to the principal amount.
Moreover, the longer the tenure, the lower the monthly payments. Conversely, for shorter loan tenures, applicants pay less amount in interest. Besides, there are several Islamic mortgage banks in the UAE for those wanting an interest-free loan.
Here is a breakdown of the major mortgage payment components to get a better understanding.
PRINCIPAL
A portion of mortgage payments is dedicated to the principal amount. It is the actual loan amount. Usually, the principal amount starts low and increases with time. The scenario is opposite for the interest amount.
INTEREST
It is the additional amount applicants pay to the lenders. The percentage of the down payment and loan amount determines the interest rate. This may vary with loan providers. Fortunately, the UAE has a good interest rate that allows more buyers to take a loan.
INSURANCE
Many mortgage providers have made it compulsory to have home insurance in Dubai for all borrowers. Home insurance protects the property against unprecedented events. Moreover, it serves as a backup for lenders if the borrower fails to pay the loan payment.
DOCUMENTATION
Banks ask individuals to submit certain documents to further proceed with the mortgage application. Failure to submit any of the documents can result in a rejection. Moreover, some banks may ask for additional documents. This can depend on the type of property and the loan amount.
Check out the process of getting a mortgage in Dubai to learn about all the required documents.
FAQs
How Does a Mortgage Work in Dubai?
Applicants can choose either a fixed-rate or variable-rate mortgage. Additionally, Dubai has options for both conventional and Islamic mortgages. The applicant can decide on the loan tenure. However, the interest rate and EMI can go up for longer tenures.
What is the Structure of Mortgages in Dubai?
The loan payment comprises two things – interest and principal amount. The principal amount is the actual loan amount. Whereas, interest is the additional amount the lender pays to the borrower. This usually remains the same for all types of mortgages in Dubai and other emirates.
What is the Tenure of Mortgage in Dubai?
The maximum mortgage tenure in the UAE is 25 years. However, it is Important to complete the mortgage before retirement.
There you have it, Dubai’s mortgage payment structure explained. A property mortgage is a great way to buy a property for individuals with limited resources. Understanding the structure of mortgages in Dubai can help make a better and more informed decision when opting for a mortgage.
Check out the minimum salary to buy property in Dubai and see where you stand. Moreover, go through these tips to avoid getting a loan application rejected and increase your mortgage approval chances.
If you are looking for luxury and affordable properties in the most sought-after neighbourhoods of Dubai, you can find it all on dubizzle. Browse through these properties for sale in Dubai and fast pace your search for the ideal home.
For understanding mortgage structure in Dubai and other emirates, stay tuned to dubizzle’s property blog.
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