September 10, 2017
Before you add your signature to home application forms there are some key things you must ask.
Taking out a mortgage is a big deal. It is likely that it will be the biggest loan you take out in your life; or put another way, it will most probably be the most significant debt you ever have to your name. Picking a mortgage is not a decision that should be made lightly. There are thousands of different products available – so how can you be sure you are choosing the right one for you? Speaking to a mortgage adviser who is adept at understanding all the complexities that come as part of the mortgage package can certainly help, but what questions should you be asking them? Here are ten questions you need to ask…
• Did you do a review of the entire market? Are there any better deals available?
• Why is this bank charging an upfront fee of 1%?
• Are they any hidden costs?
• Why is this bank insisting on a salary transfer?
• What are the negative points of having a mortgage that requires a salary transfer?
• Can I choose my own life insurance provider?
• What happens if I want to break the loan?
• What happens if I want to leave the UAE?
• What happens once the fixed period expires?
• Can I make additional payments? Is there a limit or are there any fees involved?
COMPARE THE ENTIRE MARKET
Remember that the mortgage with the lowest advertised interest rate could end up being the most expensive.
In more mature mortgage markets such as in Australia and the UK, advertising regulations stipulate that banks and mortgage providers must quote both the annual interest plus an annual comparison rate that takes into account all establishment fees, break fees, initial and ongoing interest rates and charges over the course of the loan so consumers can compare the real total cost. The UAE does not yet have such regulations but at the least make sure your mortgage advisor outlines two or three options suitable for you that clearly outline the following: interest rate, application fees, establishment fees, valuation fees, revision rate, extra payment fees and limits, break fees if you want to sell, break fees if you want to refinance with another bank, and mandatory life insurance costs.
A loan that requires a salary transfer could suddenly become hugely expensive should your employment circumstances change. If you lose your job, some lenders will hold your end of service gratuity until you are able to provide them with a new employment visa. And should you leave the country, they may keep it and switch you to a more expensive non-resident interest rate. In most circumstances, it is advisable to avoid mortgages that require a salary transfer.
Life insurance policies and fees vary massively between lenders in the UAE. Make sure you understand the cost of life insurance, whether or not you can choose your own life insurance policy and whether or not your non-working spouse also needs to be covered. The answers to these questions could make a significant difference to your monthly fixed outgoings.
BREAK COSTS UAE
Central Bank regulations stipulate a maximum loan break cost of 1 percent of the loan amount capped at AED10,000 but your bank may charge more during the fixed period. Make sure you understand what the implications are if you want to sell or if you want to refinance with another mortgage provider.
Most lenders allow you to make additional repayments. Most will allow at least 20 per cent of the outstanding loan amount per year without charge.
BANK PROCESSING FEES
The bank will often charge a fee to establish your loan. This can be up to 1 per cent of the loan amount. Sometimes higher. Sometimes it’s zero. If pushed hard, occasionally lenders will reduce this fee for strong applicants. Due to the volume of business we write, mortgagefinder.ae have agreements in place with several leading lenders to waive and reduce bank processing fees for our clients.
TALK TO US
mortgagefinder.ae is part of the Propertyfinder Group of companies and is the single most successful mortgage consultancy and introducer in the UAE. Our advisors are professionally trained and accredited, each with several years of local mortgage experience. Each year, we help hundreds of families buy their dream home in the UAE. Most of them referred to us by other satisfied clients. We are here to help!