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19 March 2024

5 things you must note before taking a home loan in UAE

Published
By Parag Deulgaonkar

Case one: NN, an Indian expatriate, bought an apartment in a project in Dubailand in 2007.

The bank, he took his mortgage from, paid 50 per cent of the amount to the developer over the next two years.

The project was abruptly halted by the developer in 2009. NN was being charged simple interest by the bank, but one morning, suddenly got a notice, asking him to pay equated monthly installments (EMIs).

His contract stipulated that he start paying EMIs two years after first loan disbursal date. Not aware of what he had signed, today he is struggling to pay his installments, while the project is still said to be “on hold.”

Case two: Another UAE resident, who had bought an apartment in a project in Jumeirah Village, was weighing the option to move his mortgage from a local bank to an international one, which was offering him a lower interest rate.

When he tried to shift, the bank asked him to pay a penalty of four per cent on the outstanding loan amount. The new bank sought 2 per cent as the processing fee for the loan.

After protracted negotiation, he managed to get his bank reduce his interest rate, thus not paying 6 per cent in total as additional charges to the banks.

Both these cases underline the need for what seems like an obvious thing to do for mortgage customers – read the fine print – but rarely gets done.
According to Mario Volpi, Head of Sales & Leasing for Cluttons Dubai, it is quite important that people read the small print and understand that the interest/profit rate is too good to be true and there could be hidden catches.
“Sometimes it’s better to go for a higher rate that gives you more flexibility in the future,” he informs.

Here are the five safety ingredients Cluttons says you need to consider while shopping for a mortgage in the UAE.

Get it right from the start
Before you start the mortgage process, you must make sure that your bank will lend on that specific building.

It sounds simple, but clients have encountered difficulties with their banks and certain buildings.

Equally, make sure the owner of the building has a title deed for the property, or has one in process. Banks will not lend to owners who do not hold this deed.

Know your bank… well

Take a meeting with your bank.

Before committing or signing anything, go into your bank and check through the terms of the mortgage in some detail. The following questions might help:

•       Can I settle the mortgage through paying larger chunks of money from time to time?
•       Will I be charged redemption penalties?
•       Am I entitled to payment holidays?
•       What happens in the event that I lose my job?

Get the right contact numbers

Ask who your day-to-day point of contact will be at the bank.

Many clients get extremely frustrated with their lack of CRM or account manager who cares about their mortgage.

Ensure you have a telephone number, and preferably a name who you can contact 24|7.

Be smart, shop around

Banks are not all the same, and what works for other people might not work for you.

Don't just go for the cheapest option, as the rate might increase dramatically once the initial grace period has gone, and equally, you might be better suited to a more flexible package that offers you the option of taking a break from payments in the event of financial difficulty.

Take an expert’s advice

Consider appointing a mortgage broker.

These teams get preferential rates based on the volume of work that they provide banks, so their initial fee can be offset by this.

Equally, they can save you time and offer you guidance and reassurance you are on the right path.

This is something crucial when operating in a market that is not your native home.