How to find out a home loan in UAE

One investment which is considered the safest investment is investing in real estate/land. Home loan or mortgage loan is a long term loan, which is taken from a financial institution to buy a real estate property, plot of land, extension, or repairs to an existing house and renovation. This kind of loan assists the borrower in raising funds to buy a house. A home loan, like any other investment, has variable and fixed interest rates with annual or semi-annual installments. 

Types of home loans:

  1. Top-up Home Loan: This kind of loan helps you borrow some more money above the outstanding loan amount. 
  2. Joint Home Loan: These are loans taken by two people or even more. For instance, spouses can apply for joint home loans.
  3. Home Loan Balance Transfer: You can use this mechanism to switch your outstanding loan amount to a different lender with better terms and conditions and lower interest.
  4. Land Purchase Loan: Someone wishing to buy a plot of land for constructing his/her own house can avail of this loan. 
  5. Home Construction Loan: This loan comes in handy when you are building a new house.
  6. Home Purchase Loan: This is the loan that one takes for purchasing a home.
  7. Home Extension Loan: Suppose you plan to add another room, garage, bathroom, or kitchen to your home. This is the loan that you should apply for, and this also comes in handy if you are planning to have another floor.
  8. Home Improvement Loan: This loan covers expenditure related to repairs of your home or even renovation.

How does a home loan work?

Buying a house is the most significant financial decision a person takes in his/her lifetime. Buying a home costs a lot, and paying all the amount upfront is not easy and affordable for some people as a result of which they opt for taking out a home loan from a financial institution. The thing with a mortgage loan is that it is a huge amount given by the bank and for which they demand a security/ collateral to back the loan in case the borrower defaults. 

Getting a home loan in UAE is secure, and many banks in the UAE offers benefits for both Immigrants and Emiratis. In the United Arab Emirates, banks provide the option of the immigrants there to have a chance at a luxurious lifestyle. The lending criteria for expats and UAE nationals are different. The banks offer up to 80% financing of the property value to the citizens, and 75% of the property value to the immigrants and the home loans in UAE are usually for 25 years or so.

The features of the home loan vary from bank to bank, and it is important to shop around and look for the best investment, which offers the features you desire. There are many things one has to consider before getting a home loan.

For starters, the initial cost. Following UAE Central Bank rules, foreigners must pay a minimum deposit of 25% of the purchase price of real estate sold for less than AED 5 million. In Dubai, in addition to this down payment, an additional 4 percent transfer fee and a 0.25 percent mortgage registration fee calculated on the loan amount will be required. In all emirates, you usually pay 2% real estate fees, 2,500-3,000 valuation fees, and in most cases, up to 1% of the loan amount.  

Secondly, banks in the UAE have criteria for minimum monthly salary. The requirements for nationals and immigrants are different. So before applying for a home loan, your income should meet the needs of the banks you are considering.

Another criterion that is essential and helps the loan acquiring process is that if you are employed, then your employer must be listed with the bank. This will help reduce lending risk. If you’re self-employed, then your business length is considered, and that should be more than two or three years. 

A credit score is the most important thing when you are applying for any loan. The credit score is derived from the person’s history and includes all financial details such as deposit and withdrawal cash flows and loan history. A financial institution refuses a loan application for a mortgage loan if it has insufficient or no credit history.

Lastly is the documentation, which is the same for UAE nationals and immigrants. The foreigners have to provide a copy of their passport while the residents have to give a copy of their visa apart from this the banks require an employment letter, trading license if self-employed, bank statements, salary certificate, etc.

As long as you have a good credit history, and you fulfill all the eligibility criteria, the loan process should be smooth and will easily be granted. 

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