Understanding Mortgage Rates
To begin with, understanding how the mortgage works is quite a difficult task. Sometimes it can be complicated. However, for your benefit, we try to break down the overall cost.
Long-term rates: Base rate + EIBOR (Emirates Interbank Offered Rate)
Base rates may vary from bank to bank. Additionally, EIBOR is standard across all banks and is normally published and regulated by the UAE Central Bank.
Short-term rate: Most banks in the UAE offer a fixed rate for a short-term term, which usually varies between 1 and 3 years.
Overall, as a customer, you need to focus more on the long-term rate. By doing so, you will benefit the most, as the popular adage clearly says “the lower the base rate, the better the mortgage”.
Some important things to consider
Mortgage pre-approval is valid between 30-90 days and that too on the basis of the bank
Property valuation cost is usually from AED 2,500 to AED 3,000, again, depending on the bank
- Expats and non-residents of the UAE are considered eligible for a maximum loan-to-value ratio of 50%
- In the event, where your mortgage advisor might ask you to inflate the property purchase price, please refrain from doing so. Getting higher LTV by unethical means is illegal and it does not help the matter by any means. On the contrary, this might result in a situation, where your property valuation might get negative rankings
- Even before searching for a suitable property, it would be a good idea to get the pre-approval done. This will give you some extra leverage, while negotiating for better terms with the seller.
- Some additional expenses that you are likely to incur involve the likes of loan processing fees, valuation fees and property insurance.
- The UAE property market is gaining a lot of traction and is popular with most of the foreign expats. So, when it comes to investing in the property market, irrespective of your nationality, mortgages are offered by local as well as international lenders.