A loan that is secured by property or real estate is called a mortgage loan. In exchange for funds received by the homebuyer to buy property or a home, a lender gets the promise of that buyer to pay back the funds within a certain time frame for a certain cost.
Mortgages are used by individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front. Over a period of many years, the borrower repays the loan, plus interest, until he/she eventually owns the property free and clear. Mortgages are also known as “liens against property” or “claims on property.” A mortgage loan helps you raise money so that you can make up for your financial shortage and also purchase what you want. Mortgage loan is a Secured Loan. The loan is secured on the borrower’s property. Once the repayment is completely done, you will be able own the property on your name or get back your belongings.
MORTGAGE LOAN PROCESS
You get ample time to pay off your loan, as a mortgage loan is normally taken for a longer period. The major factors that influence the repayments process are the size and term of the Mortgage loan. The size of a Mortgage loan refers to the amount borrowed from your lender and the term denotes the tenure of loan within which it needs to be repaid. If you borrow a huge of money for a longer tenure, you can pay it off by paying smaller EMIs. Because longer tenure results in smaller monthly repayments. That’s why many people choose tenures like 20 years and 30 years to pay off mortgage loans.
Normally, the followings steps involve in the whole process :
- Collection of necessary documents for loan processing.
- Credit appraisal.
- Loan sanction after proper credit check and verification of information.
- Sanction letter delivery at your doorstep along with a soft copy sent to your Email Id.
- Request for disbursal.
- Property documents collection by bank.
- Documents are legally examined.
- Upon successful verification, disbursement cheque is prepared and delivered.
- It is a cost effective way of borrowing. Normally, you can take a mortgage loan for a longer duration and pay off your repayment by using smaller monthly EMIs.
- Mortgage loan charge lower rates of interest on your borrowings than any other loans.
- A mortgage loan helps you buy your own house. You can afford to buy a home with the help of this loan and be the sole owner of your property once repayment is over.
- You can get loans against under construction property, fully constructed property, freehold residential and commercial properties
- Get access to a higher amount of funds.
- Both residential and commercial properties are accepted as collateral for mortgage loan.
DOCUMENTS REQUIRED :
The documents required for a salaried and self-employed individual differ slightly.
- Original Emirates ID and Emirates ID copy
- Valid Passport Copy with valid Resident Visa page (Old Passport copy if Visa is stamped on old Passport)
- Latest Salary certificate addressed to Emirates NBD
- Latest Pay slips (in case of more than 10% variance in Salary)
- Previous employment proof if less than 3 years
- Latest 6 Months Bank statement
- Valid Trade License copy
- Plus MOA (Memorandum of Association) including all amendments
- Latest 6 Months Bank statement
- Latest 2 years audited financial
Co borrowers documents (if applicable)
- Co-borrower’s valid Passport and visa page
- Income documents (if applicable)
- If Co-borrower is a company, then MOA & TL to be obtained. Passport Copy of partners also to be obtained
If you’re self-employed, you probably already know that it may be a little harder for you to get a mortgage loan than for someone who works at a big company. But it’s far from impossible.
There’s no such thing as a ‘self-employed mortgage’. You are going to get a normal mortgage, you just have to jump through more hoops to prove your income than someone who is on a company payroll.
The application process for a mortgage is the same regardless of whether you work for yourself or not. You will need to submit various verification documents, such as income and credit statements, to determine your mortgage eligibility. Just as with a traditional home loan, lenders always look at three main factors during the underwriting process :
- Your capacity to repay
- Your credit history
- The value of the home
For self-employed borrowers however, the criteria are a lot stricter when it comes to availing a home loan in UAE. The reason is for uncertainty of income.
- The borrowers need to earn a minimum salary of a certain amount that is decided by the bank. Certain banks require this income criterion to be set at AED 10,000 ranging all the way up to AED 40,000
- Borrowers are required to make a down payment which ranges from AED 20,000 to AED 35,000
- Maximum Mortgage loan amount available depends on the above criteria and ranges from AED 10,000,000 to AED 15,000,000
- The interest rates charged maybe a flat rate or a reducing rate and are decided by the bank at the time of loan approval.
- One of the biggest reasons the self-employed get denied for a loan is that they haven’t been self-employed for long enough. Another issue is not showing enough income.
A commercial mortgage is a mortgage loan secured by commercial property, such as an office building, shopping center, industrial warehouse, or apartment complex. The proceeds from a commercial mortgage are typically used to acquire, refinance, or redevelop commercial property. This will also help you own the workplace of your choice so that you can take a step closer to your business goals.
Unlike residential loans, the terms of commercial loans typically range from five years (or less) to 20 years, and the amortization period is often longer than the term of the loan. A lender, for example, might make a commercial loan for a term of seven years with an amortization period of 30 years.
Can your house offer you liquidity without being sold or rented out ?
Most people are not aware that their debt-free property can get them lump-sum cash without the requirement of having to sell it. This is what equity release loans are all about – a financial product that can help you unlock the hidden value in a property that you own.
Equity release is a common lending option being offered to homeowners around the world. Equity Release is a term used when someone borrows against the value of their existing property. These funds can be used for any purpose and the interest payable is charged at mortgage rates. Equity Release is a very cost effective way to raise cash needed for any reason whether it be to settle outstanding loans, to fund property renovations, business cash flows, to invest in another property in the UAE and/or overseas; or to fund children’s educational expenses.
It’s also a far more attractive option for investors who are planning to purchase a second home. Under current mortgage rules, expats can only borrow 60 percent of a second or subsequent property’s value, while UAE nationals can only borrow 65 percent.
Among the banks who offer home refinance products to UAE residents, ADIB offers up to 70 percent of their property’s value. Emirates NBD also offers a loan against property to expats and UAE nationals with a loan-to-value of up to 70 percent. Expats can get a loan of up to AED 7.5 million for a maximum loan tenure of 20 years. Noor Bank and ADCB also offers similar mortgage refinance options.
From the bank’s perspective, they have collateral from the borrower in the form of a completed property, and as a result, can offer favorable interest rates as the credit risk is reduced. From the borrower’s perspective, they can unlock the capital from their existing property to purchase a second one.
In order to qualify for equity release financing, the borrower should already have paid off most of the mortgage on their existing property.
But what are the benefits for borrowers ?
The main reasons to release the equity in a property are.,
The first – self-employed residents considering a cheaper method of funding their business expansion or increasing their cash flow – is currently the most popular
“As their requirements have increased and their businesses have grown, as they have come out of the recessionary period, entrepreneurs have looked more at their properties as a way of funding those things,”
“You are looking at 15 per cent or 20 per cent [in interest for small business loans], so if they have equity in their property it makes sense for them to utilize that as collateral.”
“A lot of the small business owners and partners are looking at this. It is a fixed asset that is secure which you still own. The tenures are longer, 25 years and so on,”
Key Features :
- UAE nationals can borrow up to 80% of the property valuation
- UAE expats can borrow up to 75% of the property valuation
- Residential, commercial and land considered
- Cash can be used for any purpose
- Islamic and conventional options available
EQUITY RELEASE FOR NON-RESIDENTS
Nonresident owners of UAE property may also unlock up to 50% of the value of their UAE property quickly and easily.
Key features :
- Borrow up to 50% of the property valuation.
- Residential and commercial properties considered
- Cash can be used for any purpose
- Islamic and conventional options available
- Available to all nationalities (except Iranian passport holders)*
Getting a new mortgage to replace the original is called refinancing. Refinancing is done to allow a borrower to obtain a better interest term and rate. The first loan is paid off, allowing the second loan to be created, instead of simply making a new mortgage and throwing out the original mortgage
Refinancing is the process of swapping out loans, moving debt to a different loan or lender. The process is briefly described below:
- You’ve got an existing loan
- You apply for a new loan
- The new loan pays off the existing loan
- You’re now left with the new loan
There are several potential benefits of refinancing.
Save money : a common reason for refinancing is to save money on interest costs. This generally requires that you refinance into a loan with a lower interest rate than your existing interest rate.
Improve cash flow : When you refinance, it’s often the case that you extend the amount of time that you’ll repay a loan – this means lower monthly payments.
Shorten your loan term : you can also refinance into a shorter term loan. For example, you might have a 30-year home loan, but that loan can be refinanced into a 15-year home loan. This might make sense if you intend to make larger payments to get rid of the debt more quickly
Consolidate debts : if you have multiple loans, it might make sense to consolidate those loans into one single loan – especially if you can get a lower interest rate
Change your loan type : even if you don’t get a lower interest rate or monthly payment, it can make sense to refinance for other reasons. For example, if you have a variable rate loan, you might prefer to get a different loan with a fixed rate. This would make sense if rates are low but you expect them to rise.
Pay off a loan that’s due : some loans have to be repaid on a specific date, and you might not have the funds available to completely pay off the loan. In those cases, it might make sense to refinance the loan – pay it off with a new loan – and take more time to pay off the new loan.
Transaction costs : refinancing can be expensive.
Additional interest costs : when you stretch out a loan over a longer period of time, you pay more interest.You might enjoy lower monthly payments, but that benefit can be erased by the higher lifetime cost of borrowing
Lost benefits : some loans have important features that will go away if you refinance.
The real estate industry requires a constant stream of revenue for various construction related tasks. From the under construction stage to the handover stage, developers must have funds available to ensure the timely delivery of housing or commercial units. Stalling a project mid-way owing to paucity of funds is a common problem faced by many housing and commercial development projects. Real estate developers can overcome this hurdle by availing construction loans.
With property prices remaining sky-high and the interest rates yet to ease significantly, many prospective buyers would be tempted to check out under-construction properties for their cheaper price tags.
EMI Under Construction enables you to make payments through EMIs, in a partly disbursed loan for an under construction project. The loan amount is partly disbursed and EMI is set as per the sanctioned amount. The tenure of the loan keeps moving up with additional amount being disbursed. The EMI will remain constant during the tenure of the loan. Save on interest and ensure faster repayment of the loan. Since your EMI starts immediately after the 1st disbursement, your principal repayment also begins simultaneously, thereby reducing your interest burden and tenure.