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My home was appraised at Dh2 million at the time of purchase. I am now looking for refinance options. What factors should I consider?
When considering a property appraisal, you should include economic and social trends, government regulations, and elements like value, demand, utility and scarcity. Current appraisal values may regulate depending on the market performance graph. The best approach to get an estimated current value of your property is to appoint a good realtor as they should be able to identify the prevailing market price. You mentioned that you are looking for an equity release. Once you are clear with the equity value, approach banks to find competitive offers as per their lending criteria. After the initial credit review of your income documents, the bank will conduct a property valuation through an external assessment agency (the cost will be borne by you). The bank will then identify the loan amount.
I bought a property in Dubai two years ago which is currently mortgaged. I am now looking for a holiday home in RAK. Will I qualify for a second loan?
A second mortgage is certainly possible but with a lower loan-to-value (LTV) ratio and it requires a larger down payment. Considering the current mortgage cap in the UAE, it will be curbed to 60 per cent LTV regardless of the value of the property. Hence, it is prudent to understand your current financial matrix before stepping ahead for a second mortgage. There are a few mortgage lenders that can finance properties outside Dubai. However, these financiers prefer to lend to those buying ready properties developed by reputed developers. You should, therefore, carefully choose a property in Ras Al Khaimah (RAK) which can be mortgaged and with an available title deed. It is imperative that you understand the ownership document, and the governing property laws and regulations in RAK.
I have a decent credit history and need a mortgage for a villa. I am currently not working but I bought a flat in cash and leased it out. Please advise.
If you are considering instant cash to buy a new property, it is advisable to have a loan against the cash-bought property since you have a regular income from that property. A mortgage lender will be very keen to understand how you will pay the monthly dues; hence, you can show the monthly rental income which will certainly suffice. However, the lender may check your debt-to-income ratio to see if you can cope with all your existing responsibilities. Approach a mortgage consultant who can provide you with an unbiased solution and find competitive rates as per your need. Currently, there are a few financial institutions that lend funds based on pure rental income. Consult such mortgage lenders and check how much maximum amount you can attain based on your property’s current market value. Thereafter, you can decide where to invest that equity to capitalise the investment portfolio.
I am a non-UAE resident planning to invest in a buy-to-let property in Dubai. What are the documents required to apply for a mortgage?
Applying for a mortgage as a non-UAE resident is not difficult as there are several product offerings in the market which give competitive rates and terms against ready property purchases. A mortgage expert can guide you in the right direction depending on your purchase requirement and income profile.
Once you apply for a mortgage, the lender will check your income documents, debt obligation details and personal documents from your country of residence. Every lender conducts their own due diligence to determine one’s loan eligibility based on income and debt ratio. Accordingly, the lender offers the applicable product and rates. Currently, a non-UAE resident buyer is eligible to obtain a loan of up to 70 per cent of the property value and the rates start from 4.49 per cent; however, these product offerings are subject to the bank’s discretion.
Question of the Week
I bought an apartment last month and am now seeking a tenant who can take care of it properly. What should I consider when renting it out?
Renting a property in this part of the world comes with certain rules and regulations which the landlord and tenant need to adhere to. Once the buying process is completed, the buyer needs to ensure the entire apartment running cost is covered by the rental value if it is an investment property. You can consult an agent or study the rent calculator to give you an idea of the rental value. You can then appoint a real estate brokerage firm to manage the leasehold work. Once you sign an agreement with them, they will market the property, find a suitable tenant, make the tenancy contract, get the tenancy contract registered at Ejari, collect the rental cheques and hand over the key to the tenant. Once the tenant contract is in place, there are certain laws which need to be understood. Tenants must give the landlord 90 days prior notice if they wish to stay or leave the property. Likewise, the landlord must give 90 days’ notice if he/she requires raising the rent in line with the RERA rental index and as per the law; the owner cannot quote beyond that percentage. Moreover, if the owner wants to sell the property, he has to inform the tenant 12 months prior by issuing a vacating letter to him. If any illicit dispute happened with the tenant and vice versa, the landlord or the tenant can discuss it with the RERA Rental Committee.
Source: Dhiren Gupta, Special to Freehold
Managing Director, 4C Mortgage Consultancy