Buying property using your housing allowance

Coming to Dubai for new opportunities and a new career path is a very exciting time. One of the many draws to the UAE for expats is the enticement of a higher salary package. In some cases this package can include a generous housing allowance to help you settle in and find a new home.

But is renting the best way to utilise this money?

Many people overlook the fact that the housing allowance can actually, in many cases, be used to get a mortgage and buy a property in Dubai. Making this sort of investment can lead to many long-term gains and, with our help, it is easier than you might think.

Can I use my housing allowance to buy a property?

There are three main ways that a company will provide your housing allowance but all can be used towards a property purchase rather than rent:

In a lump sum

Some employers will offer a housing allowance as a lump sum, or be very willing to provide an advance on monthly payments to become a lump sum if asked. This can very easily be used towards a down payment on a home, opening up a huge range of mortgage products.

Not only that, a lump sum payment means you have the capital behind you to deal with the fees associated with getting a mortgage and buying a property in Dubai. It’s an easy way to take full advantage of the housing allowance and convert it into a long-term home and later investment.

As a monthly allowance

If your employer provides a housing allowance as a monthly sum, then this means it cannot really be used to form part of your down payment or towards the fees associated with buying.

However, all is not lost as a monthly housing allowance gives you a level of security when it comes to applying for a mortgage.

For mortgage lenders, one of the most important criteria is that of affordability. They want to know that you have enough money coming in each month to pay your mortgage repayments without straining your resources. A monthly housing allowance helps provide a guarantee that you can do this and can be counted towards your affordability.

Provided accommodation

Other employers will provide accommodation for you rather than paying out the housing allowance. This is helpful in the sense that it is one less thing to worry about when first moving to Dubai, however it can be restrictive if you would prefer to use the allowance elsewhere. In this scenario, it should be a little easier to save for the down payment for the property purchase as there isn’t the concern of paying rent which generally takes up a large portion of salary.

Most employers, however, are happy to discuss the allowance with you and help you reassign the money to a monthly allowance or lump sum payment instead. If you are in this situation it is worth raising this with your employer to see if this is something they would consider.

Why buy rather than rent?

When you are only planning to stay in the country for a relatively short period – say a few years – it can seem that buying a home isn’t worthwhile, but this is not necessarily the case.

Dubai properties enjoy high rental yields – as high as 10% in some areas. This means the opportunity to turn your housing allowance into a strong financial investment for the long term is ripe.

By buying a property, you give yourself the security of having a home you own during your time in Dubai. You also have the opportunity to remain a landlord if you choose to move on as you can rent the property out.

When you are renting, you are taking your money and putting it into someone else’s long term investment plans! Why not use it for yourself?

The time is right!

The prices in the Dubai housing market are currently very favourable to investors and those looking to buy a home. This, coupled with the current mortgage interest rates, mean that depending on where or what you buy, your mortgage repayments could even be lower than renting!

A rare opportunity

If your housing allowance is particularly high or can be obtained as a lump sum then the opportunity available to you is great.

Take advantage of your housing allowance to buy a home rather than watch it slip away over the years in rental payments!

At Mortgage Finder we have specialists who can advise you on the best way to maximise your housing allowance advantage. Give us a call today!