Ask the agent: How can I arrange a mortgage for my retail shop?

Dhiren GuptaDhiren Gupta

How does a mortgage work on off-plan projects and how wide are the options with banks to devise a mortgage?

Banks are very specific in funding off-plan structures, particularly by private developers, as there are probabilities that they might call off the project or the development might be overdue as projected. But there are some developers who tie up with banks for mortgage facility, which definitely gives security to investors or end-users to lock their investment with the assurance of finance options. However, the finance option for an off-plan project is only limited to 50 per cent of the property sale price and is paid by the lender, as per the payment plan described in the sale and purchase agreement, to the developer’s escrow account. Since not every lender funds an off-plan project, it is prudent to conduct due diligence on the developer – whether it is a new entrant in the market or has delivered in the past, its project history – for a bigger chance to get a mortgage.

I bought an off-plan project with a 30-70 payment plan. The 30 per cent is already paid. As a non-UAE resident, can I secure a 70 percent mortgage?

As a non-UAE resident, you are eligible to secure 50 to 70 per cent of mortgage based on your requirement and working status. Every bank will carry out an affordability check, and based on your documents, will lend you the required fund.

There are some banks which have a non-UAE resident product. You can either hire an independent mortgage consultant who can assist you and get you the best possible options as per your requirement, or approach different banks to check your possibilities.

For mortgage approval, banks will review your income documents, resident evidence, personal bank statements and any other liability portfolio, along with the handover letter and Oqood copy to sanction your loan application form. It will take around three to four weeks.

I am planning to refinance my Dubai apartment. Can you explain the price during the buyout process.

The current departing cost usually runs about 1 per cent of the principal, owing the amount is inclusive of the application, appraisal, Dubai Land Department and life insurance fees.

Moreover, at present, borrowers have great resilience as lenders are concentrating more on giving sustainable rates for buyout or refinancing, where the charges of undertaking are reduced and superfluous amends are dropped by banks especially when they bow out the processing fees. Some banks are even offering free property valuation which assuredly gives convenience to borrowers to secure better terms and rates.

Certainly, before starting the process, work out whether the savings reward the refinancing costs and get the full pricing quote from your lender. To lock up the best buyout, shop around, negotiate, look for promotions and extra benefits offered by different lenders, and calculate the “break-even” to save more.

My wife and I are interested in buying a Dubai property to let. I am self-employed and my wife is employed. We are looking for a joint mortgage application. Is it possible since I am a Kuwaiti resident?

Yes, as a non-UAE resident, you can apply for a joint mortgage. However, banks will check your individual affordability and combined affordability based on your income portfolio in your home country. In the UAE, the process and the benchmark to seek approval for buy-to-let or end-user mortgages are the same, so you need to follow the same guidelines to lock your mortgage.

The funding ratios would differ with banks, but these usually range from 50 to 70 per cent, based on the property and documents provided to evaluate the case. Also, the funding rates (for non-UAE resident applicants) would be higher in contrast to those of UAE residents; however, the transaction cost to execute property transfer remains the same. So, shop wisely and do proper research before finalising the deal


Question of the Week

I have a well-established business in the UAE. Now I am planning to buy my own retail shop. How can I arrange a mortgage for my retail shop? What are the documents needed and how long does it take to get an approval?


In Dubai, commercial funding is limited to a few banks which screen buyers’ profiles within the set parameters of lending. Most banks are contented in providing finance on completed projects in which the title deed is available with the buyer.

Currently, banks offer commercial lending ratios between 60 and 75 per cent loan-to-value mortgage, contingent on the buyer’s requirements. Every bank has its set benchmarks, so it depends on which bank you choose. Interest rates for a commercial mortgage are normally higher than residential property mortgage rates, which presently range from 4.99 to 7.5 per cent, depending on the lender.

The documentation and process are comparable to residential mortgage itself. The buyer avails himself of a pre-approval from the bank. Upon providing the required documents (title deed, valuation fee, seller’s passport copy, floor plan, etc.), a property valuation is done. After the final approval, handover is scheduled at the trustee office of the Dubai Land Department, wherein a bank representative transfers the pay order to the seller. The process takes three to four weeks.


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Source: Dhiren Gupta, Special to Freehold

The writer is Managing Director, 4C Mortgage Consultancy


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