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You've decided to invest in property in the UAE and you require a mortgage. First, you need to look out for certain pitfalls in the banking industry and learn to read between the lines. You might also want to consider hiring a knowledgeable mortgage consultant who can provide short and long-term value.
''Your advisor needs to have access to every mortgage product and have formal agreements with all major banks in the market,'' says Jean-Luc Debois, Managing Director of Home Matters Mortgage Consultants and creator of the Certified Mortgage Broker course.
''Newer mortgage consultancy firms will often boast they have access to all banks when they do not, so don't be shortchanged.''
Choosing the right bank can be a cumbersome process because it is time consuming and you will most likely deal with several different people during the process. There are more than 30 banks offering mortgages. Though you might be familiar with standardised features like loan-tovalue ratios and buy-out fees, there are certain pitfalls that banks often neglect to mention. In their opinion, every bank feels the product they are offering is the best one on the market.
So this is what you need to know when trying to secure the best possible mortgage terms.
The lowest rate won't save you the most money
Just because a bank advertises its rate as the lowest and offers enticing introductory rates, does not mean you should accept it. The rate is only temporary and will increase as the years accumulate. Typically, these are one-year fixed rates.
Ask how long the rate remains fixed
Stay away from the bank's ''internal base rate''. Many banks will tell you their own internal base rate is the best option for you. This isn't true because when you choose a bank that has complete control over how the rate is determined in the future, you are entering into a high-risk agreement, as the bank has complete discretion over increasing rates.
The best practice here is to go with banks that link all their future rates to the Emirates Inter Bank Offered Rate (Eibor). This is a more transparent way of doing business.
The myth of maximum fixed-rate mortgage
You will run into mortgage advisors who misquote ''fixed margins on variable rates'' as ''fixed rates for the entire mortgage term''. This is simply not true. There are no banks in the UAE offering a fixed full-term rate for 20-25 years.
Don't pay interest on anything other than the mortgage
Certain banks do not offer a very competitive insurance cover. Insurance is mandatory, yet the bank's terms might be inflexible. Steer clear of banks capitalising on insurance premiums and then adding them to the mortgage; you're paying interest on insurance costs and the loan. Instead, shop around for property insurance.
Get it in writing
If you're not getting it in writing, don't agree to anything. If terms are promised over the phone or face-to face, always ask for them in writing. Many advisors and bank personnel tend to make too many promises and commitments, while failing to live up to them.
Look at all the fees When you proceed with a mortgage, you're in it all the way, and the parts that don't suit you, you'll have to absorb the cost anyway. Therefore, understand the full set-up costs, the rate and exit fees, before agreeing to any terms.
Choose the right bank for the right mortgage
If you're planning to buy an off-plan or leasehold property, your chosen bank should be financing it, while you make note of the restrictions. This is important as customers often end up wasting time and money by choosing a bank/product that does not cater to their individual needs.
Helen Tatham, Managing Partner of Prime Places Real Estate, recommends using a mortgage consultant that can ''identify a lender who offers the most favourable terms to suit the buyer's circumstances, whereas one bank is limited to its own policies''.
As a Muslim, you're probably looking for a Sharia complaint mortgage plan. Many banks do not offer this option, so you will need to ask if they do.
Mortgage consultants can save you time and money
Expats are somewhat reluctant to hire the services of a mortgage consultant, thinking there's some kind of a catch. Also, the idea of a bank doing it for free is hard to pass up. However, a mortgage consultant is the one person you can rely on to give unbiased, impartial advice on which loan is the best, based on your unique circumstances. Mortgage consultants see the big picture. They have access and agreements with all major UAE banks and will ensure you receive the best mortgage terms, which are suited to your individual requirements. This saves you a tremendous amount of time because the consultant does all the legwork.
What you're looking at are significant savings in terms of fees — prominent consultants have access to many exclusive offers from banks. So you're saving on the rate and the loan as a whole. The first thing you should look at when choosing a mortgage consultant is its Certified Mortgage Broker licence. Finally, your advisor needs to be 100 per cent experienced and knowledgeable on both mortgage and real estate markets, as well as related processes.
Saving in the long run
Established and reputable mortgage consultants can secure exclusive terms with banks, which ensure you receive better value. Securing what you feel is the best possible mortgage might sound like a task, however, if you follow these tips you are on the right track.
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Source: Lynnette Abad, Special to Property Weekly