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But what are the different types of mortgages and how do you apply for one?
We’ll break down the basics of what a mortgage means and explain what you need to know before starting the process.
The buyer applies for a loan from a bank or financial institution to pay for the property they’ve chosen. If it’s approved, they’ll sign a contract agreeing to make regular payments to the lender, including interest, until the total amount is paid off.
Instead of paying rent to a landlord every month, you can gradually pay off your apartment, townhouse, or villa, and get a foot in the UAE property market.
There are different types of home loans on offer in the UAE, including:
When applying for a mortgage, you’ll also have the option to choose between a fixed and a variable rate.
As the name suggests, the interest rate remains the same during the fixed period of the loan, be it 1 year, 2 years, or more. This means your monthly payments will stay the same during this fixed period, making it easy to budget and plan.
Fixed-rate mortgages are popular with people who prefer the stability and predictability of knowing exactly how much they’ll have to pay each month during the fixed period.
It also means you won’t be affected by rising interest rates during the fixed-rate period. But the downside is that if interest rates fall, you won’t benefit from lower interest payments.
Explore: Fixed-rate mortgages
Unlike a fixed-rate mortgage, a variable mortgage is linked to the Emirates Interbank Offered Rate (EIBOR) and can fluctuate over time based on market conditions.
This can result in your monthly payments increasing or decreasing along with the current interest rate, making it harder to budget for the long term.
While you could save money if interest rates decrease, there is the risk that you could also pay more over time if interest rates stay high.
Explore: Variable-rate mortgages
Before looking for a property and applying for a mortgage, it can be helpful to get an Approval in Principle from your bank or lender. This gives you a good indication of how much they would be willing to lend you, based on your creditworthiness and perceived ability to repay the loan.
All you need to do is provide your proof of identity and proof of income. It’s fast and free. It can also give you an upper hand when dealing with a seller or property agent, as they’ll know you’re a serious buyer.
Regardless of whether you’re a UAE resident or not, you’ll need to have a credit bureau check and provide the following:
See more on how to apply for a mortgage.
If you're wondering how first-time buyer mortgages work or are planning to buy an investment property, it's important to do some research.
Look at the different types of home loans on offer and their requirements and decide which one works best for you. Once you’ve completed this process, you’ll be one step closer to owning a property!
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