As of October 2019, the Central Bank of the UAE has removed the maximum age limit for mortgages in the Emirates. This now gives older home buyers and investors the chance to obtain a mortgage where previously it was not possible. But what do the changes actually mean and what opportunities now exist with the lending banks?
What is the age limit for mortgages?
A mortgage is a long term loan that often stretches to 25 years. Unlike shorter loans with terms such as three or five years, a mortgage taken out later in life can have a real chance of continuing past retirement and a regular salary – an increase of risk for the lending institution.
Previously, the UAE Central bank imposed a limit on the age of the last repayment: 65 years old for those employed by a company, and 70 for the self-employed.
This meant that any employee looking for a 25 year mortgage had until their 40th birthday to secure the finance. Getting a mortgage after age 40 meant looking at shorter term loans, raising the cost of each monthly repayment and having a significant impact on any affordability checks.
The pros and cons of the mortgage upper age limit
Having a limit in this way does make some sense; without a regular salary (as can be the case beyond age 65) the bank is at a greatly increased risk and justified in asking where that payment is going to continue to come from.
By imposing such a restriction, the Central Bank serves to protect institutions from unwanted defaults.
However, in reality, the market would definitely benefit from investment from older borrowers. Many people in their fifties may be put off by the large monthly outgoings of a ten to fifteen year mortgage, but be more than able to justify a twenty-five year term, even with the extra years of repayments beyond their retirement.
By removing this upper age restriction, the Central Bank have given the autonomy for decision making where it should be – with the lending bank.
Stress testing and affordability
Lenders are not short-sighted and simply because the regulation has been removed, it doesn’t mean that they have to pass out loans without the appropriate means testing from their end.
Applications for a mortgage that would stretch beyond retirement age can now be looked at by the underwriters on a case-by-case basis and a decision made on specific circumstances.
This is a far better situation for both borrower and lender, with the bank’s stress tests and affordability checks playing a larger role in determining suitability.
Has lending increased?
It is true that currently, very few banks have made changes to their lending policies to take the new opening into account. Many are still sticking to their previous criteria, meaning that although in theory they are now able to lend to a far wider group of potential borrowers, in reality there’s been very little change.
Of course, this change is still very recent; we would hope that over time it will filter through and banks will open their policies to older borrowers. As the public become more aware of the new options and begin to make requests this will put pressure on lenders to adapt.
At Mortgage Finder, we are happy to discuss your specific needs with the banks – finding those who are embracing the new opportunity to bring a wider range of mortgage products to mature borrowers. If you are looking for a mortgage with a term that would take you beyond 65 years of age, then speak to us about your situation and we will work to find the right mortgage for you.
No restrictions for expats or non-UAE nationals
Happily, no limitation exists on this new policy, and the cap has been removed for both residents and non-residents with no prejudice regarding nationality. This opens up a much wider market for investment from people around the world.
Further changes – the knock on effect
Removing the upper age limit doesn’t just mean easier access to 25 year mortgages for the over 40s, it may also be the first sign of another change – the extension of mortgage terms. This is something Mortgage Finder hopes Central Bank will look into changing next.
Currently in the UAE the maximum mortgage term available is 25 years, whereas other countries offer longer mortgages of 30 years or more. Adding just five years to the length of your mortgage can make a huge difference in affordability and monthly bills. It can help in widening the net further for lenders and providing opportunities for property ownership and investment for would-be buyers on lower salaries.
For now though, the focus is on the older buyer and the increased opportunities for them.
Advice from Mortgage Finder
At Mortgage Finder our mortgage consultants are always available to help you through any stage of the mortgage process. If this news affects you personally and offers you a new chance for a mortgage that was previously impossible, then contact us today. Fill in our contact form or give us a call!