You’ve decided to invest in property in the UAE and you require a mortgage. First, you need to look out for certain pitfalls in the banking industry and learn to read between the lines. You might also want to consider hiring a knowledgeable mortgage consultant who can provide short and long-term value. According to Jean-Luc Debois, Managing Director of Home Matters Mortgage Consultants since 2006 and creator of the Certified Mortgage Broker course, ‘Your advisor needs to have access to every mortgage product and have formal agreements with all major banks in the market – newer mortgage consultancy firms will often boast they have access to all banks when they do not, so don’t be shortchanged’.
How to read between the lines
Choosing the right bank for the job can be a cumbersome process because it is time consuming and you will most likely deal with several different people during the process. There are more than 30 banks offering mortgages. Though you might be familiar with standardized features like loan-to-value and buy-out fees, there are certain pitfalls that banks often neglect to mention. In their opinion, every bank feels the product they are offering is the best one on the market.
This is what you need to know when trying to secure the best possible mortgage terms:
The lowest rate won’t save you the most money
Just because a bank advertises their rate as the lowest by offering highly enticing introductory rates, does not mean you should accept it. The rate is only temporary and will increase as the years accumulate. Typically, these are 1-year fixed rates.
Ask questions to determine how long the rate remains fixed.
Stay away from the bank’s ‘Internal Base Rate’
Many banks will tell you their own internal base rate is the best option for you. This isn’t true because when you choose a bank that has complete control over how the rate is determined in the future, you are entering into a high-risk agreement, as they have complete discretion over increasing rates.
The best practice here is to go with banks who link all their future rates to the Emirates Inter Bank Offered Rate (EIBOR) – this is a more transparent way of doing business.
The myth of maximum fixed-rate mortgage
You will run into mortgage advisors who misquote “fixed margins on variable rates” as “fixed rates for the entire mortgage term”. This is simply not true – there are no banks in the UAE offering a fixed full-term rate for 20-25 years
Don’t pay interest on anything other than the mortgage
Certain banks do not offer a very competitive insurance cover. Insurance is mandatory, yet the banks terms might be inflexible. Steer clear of banks capitalizing on insurance premiums and then adding them to the mortgage; you’re paying interest on insurance costs and the loan. Instead, shop around for property insurance.
Get it in writing
If you’re not getting it in writing, don’t agree to anything. If terms are promised over the phone or face-to-face, always ask for them in writing. Many advisors and bank personnel tend to make too many promises and commitments while failing to live up to them.
Look at all the fees
When you proceed with a mortgage, you’re in it all the way, and the parts that don’t suit you, you’ll have to absorb the cost anyway. Therefore, understand the full set up costs, the rate and exit fees, before agreeing to any terms.
Choose the right bank for the right mortgage
If you’re planning to buy an off-plan or leasehold property, your chosen bank should be financing it, while you make note of their restrictions. This is important as customers often end up wasting time and money by choosing a bank/product that does not cater to their individual needs.
Sharia-complaint mortgages
If you are Muslim, you’re probably looking for a Sharia-complaint mortgage plan. Many banks do not offer this option, so you will need to ask if they do.
Securing what you feel is the best possible mortgage might sound like a task, however if you follow these tips you are on the right track. Contact Home Matters Mortgage Consultants at 800 MORTGAGE for a free consultation.