A new feather in the mortgage market

Mortgage marketImage Credit: Supplied

The mortgage market is becoming competitive. Lenders are providing low mortgage rates from 2.2% to 3.99%, or discounts, or special offers. Despite offering low mortgage rates, numerous deals are still done in cash.

According to Central Bank data, the UAE mortgage sector has been sluggish from over the last 18 months. Mortgage rates might increase again like before or fall further. But reverse mortgage could add to the mörtgage market’s kitty.

Basically evolving from the Western countries, reverse mortgage is a loan against property whereby the applicant does not make any repayments until his/her death, and does not sell or move out of the property, describes Sam Wani, a certified mortgage advisor. In short, the homeowner releases equity out of the property, uses it and the property is eventually taken over by the lender.

Even though the UAE government has made no initiation to launch reverse mortgage in the country or in any of the emirate, nor any studies are conducted on the size of the market, there is some appetite for it in the UAE market. However, Wani feels that reverse mortgage would suit the local population if it is introduced. In fact, it will help pensioners manage their lifestyle better by using equity in their homes, views Wani.

To implement reverse mortgage, Wani says that the mortgage law needs to be streamlined to facilitate this process. Even though the concept of power of attorney is quite prevalent; however, this is not ideal for long-term effectiveness since the key to reverse mortgage is the takeover process by the lender at maturity, elucidates Wani.

Even if the government launches reverse mortgage, Wani advises that lenders should run it first through the Central Bank as they have regulated the mortgage market well, and history has proven that their advice has been very effective.

Handy Hints
• Reverse mortgage market could augment the mortgage sector
• The locals, especially pensioners, could greatly benefit from it
• Mortgage law needs to be streamlined to facilitate the process





Source: Arva Shikari, Special to Properties
The writer is a freelancer


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