Home is considered the safest place. Purchasing and investing in a property is the biggest life decision that most people will take. As a first-time buyer in Dubai, this guide will help you navigate the process of buying.
Taking the nosedive in the real estate market in Dubai as a first-time buyer is thrilling. But if you are thinking of going the mortgage route, it requires getting into the grips of the complexities that may occur during the process. The complications may also be different as compared to the other cities.
Owning a new home is usually one of the most exciting and scariest events in a person’s life. It is essential to get to understand the importance of home to people because it will help you make the buying process easy and successful through research.
Dubai offers a significant milestone to investors and buyers, whether for personal use or investment purposes. The city is offering a dynamic market with lavish infrastructure to live in and tax-free benefits. Dubai is attracting buyers and investors from all over the world with its modern technology and infrastructure.
However, financing such acquisitions requires strategies, especially if you are a first-time buyer, to navigate the complications of mortgages and diminish the risks along the path. This guide will walk you through the arousing process of acquisition in Dubai, help you make informed decisions, and secure the best deal.
Let’s dive in!!
What Is A Mortgage?
A mortgage is basically a home loan. It is termed a financial agreement between the lender and the borrower. In this agreement, a lender provides funds to a mortgagor to purchase a property. The mortgagor agrees to repay the home loan to the lender or bank in a specified period with interest.
Home loans are secure; the property itself serves as collateral. In case the mortgagor is unable to pay the loan back, the lender or bank has every right to seize the property and recover the loan amount.
Types of Mortgages and Their Requirements
When it comes to mortgage options, there are various types for first-time buyers in Dubai. But there are distinctions in terms of eligibility, terms, and conditions. Let’s have a look at the different types of mortgages:
Fixed-Rate
As the name suggests, for this mortgage, the interest rate at this fixed rate is set before setting the term of the loan. The rate of interest doesn’t change throughout the pre-agreed period. There are various advantages for the mortgagor in this system.
With this, it is easy to plan the financial outlay for years. In case the situation of the market changes and interest rates go downwards, the borrower is stuck with the original rate. However, if the rates go high, it will work to the advantage of a fixed lower rate.
As a borrower, study the market or look for professional help to understand different mortgage types in Dubai.
Variable-Rate Mortgages
The next kind is the variable-rate mortgage. The interest for variable depends on the different real estate market conditions. In this, the interest rate changes throughout the repayment period. The mortgagor can get exciting deals or pay a high return rate, depending on the ongoing situation. They are typically based on a 3-month Emirates Interbank Offered Rate and fixed margin rate.
If you are thinking of opting for this particular loan, ensure you have financial liquidity. This way you can handle any increase in the interest rate during repayment. These are further categorized as:
- Discounted Rate Mortgage
- Capped Mortgage
Conventional
These are the most common types of mortgages. These loans are often offered at fixed or variable interest rates. Before opting for this type of loan, the mortgagor requires a down payment, which is usually around 20% of the property value, in case you have one mortgage.
In case it’s your 2nd mortgage, then the down payment will be increased up to 40%. Whereas it is also worth noting that most banks will finance Dubai Land Department and broker fees too.
Islamic Mortgages
Islamic mortgages are structured to comply with Sharia laws. This law prohibits charging interest on home purchase plans. In this, the bank buys the property on the owner’s behalf and becomes the legal owner.
The mortgagor functions more like paying rent. At the end of the term, the mortgagor can either pay the remaining balance or buy the property back before becoming the legal owner. There are different types of Islamic mortgages:
- Ijara
- Diminishing Musharaka
- Murabaha
Navigating the Application Process
Below are some points to navigate once you start with the application process:
Checking Your Financial Readiness
Taking the time to check your financial status is the point for the beginning of any process. As a mortgagor, ask yourself these questions:
What is your inaugural budget?
What kind of mortgage are you looking for?
Do you have enough savings to cover the down payment?
Will you be able to manage monthly payments along with other expenses?
As described above, the mortgage providers in Dubai usually require the mortgagor to pay a minimum of 20% of interest as a resident, whereas it is 25% for non-residents. Also, make sure to keep an account for additional costs, such as registration fees, real estate agent fees, and maintenance charges.
Getting Pre-Approval For A Mortgage
Get pre-approved for a lease. Before buying a home, this is a basic step to consider. With this, you can have an idea of how much you can afford as a capitalist. Start shortlisting and inspecting the houses that fall within your budget.
It is better to get pre-approval before actually looking at the properties in person because you can save your time in this way.
Finding The Appropriate Property
The location of the property plays an essential role. Find the right property and check the condition of the property before making an offer. Check for various public amenities and damages to the property.
Some of the points you should consider are the distance of your apartment from your workplace, your budget to buy the property and the special amenities that might boost the value of it. The most sought-after places in the city like Downtown Dubai and Dubai Marina are some examples.
Submitting A Mortgage Application
Once you are set on buying the property of your choice, you can further move to the next step of submitting your mortgage application. Start by assembling all the essential documents required to move further. Submit all the necessary documentation. Get the property valued by an approved valuation company. Finally receive the final local approval.
The process might take some time to process, depending upon the complexities and the lender in the particular case.
Loan Approval And Signing The Agreement
As soon as your application moves forward and your loan is approved, sign the agreement. You’ll receive the final application with the loan approved. With this, you can move further to buying your property. Read carefully and outline the terms and conditions regarding your monthly payments.
Finalizing Property Purchase And Mortgage Registration
Finalize your property purchase. Sing the deal for the sales agreement with the seller. Pay your down payment and complete the transferring process at the Dubai Land Department. Ensure that all the documents are verified and in order.
Opt for a trusted and reliable real estate agent and advisor to avoid any delays and complications.
Conclusion
Financing a property purchase in Dubai can be a daunting task. But with careful generation of plans and the right guidance, the process can be managed. Investing in a property is more than just a financial decision; it is a step towards securing the future of the dynamic cities.
Dubai offers the most luxurious way of living and potential growth. With the right approach, you can turn your dream of owning property in this vibrant city.
Connect with RNG Real Estate and make the right decision.
