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How to reduce mortgage costs for UAE property buyers?

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Staff Writer, TLR

Published on July 14, 2023, 17:41:00


UAE larger part firsttime home buyers finds easier get mortgage

In UAE, a larger part of first-time home buyers finds it easier to get a mortgage from a lending institution.

There are alternative ways for savvy investors to acquire real estate that don't involve taking on a mortgage.

Here are a few ways to save money on your mortgages so you can pay less for the properties you buy.

Shop around for the best deal

The first thing you need to do before applying for a home loan is to compare shopping and find the best deal for your needs. Before you register, shop around to see the recommended interest rates by lenders and deals offered to their borrowers. You might save money by taking out a loan with your lender of preference or by going with a different lender entirely.

Compare different types of loans and their interest rates: Fixed or variable rates? Lenders, who have their funding resources? Banks or non-bank financial companies? Review between different lenders until you find the one that will give you the best deal for your circumstances.

Avoid the Lenders Mortgage Insurance (LMI)

If your down payment is less than 25% of the cost of the property,  then you will have to pay an LMI.

LMI generally applies to residential mortgage loans in which the principal amount borrowed does not exceed 75% of the property's value. The Loan-to-Value Ratio (LVR) is calculated as the loan amount divided by the property's value.

For example, if your property is valued at AED 1 million and your loan is for AED 500,000 then your LVR is 50%. If the property's value falls below this level, you may be required to obtain additional insurance. This prerequisite is negotiable. With the mortgage provider, it will almost certainly increase your overall costs. Negotiate with your lender to pay a higher down payment to avoid the LMI requirement or to avoid paying the LMI altogether.

Consider obtaining a short-term loan. In most cases, choosing a shorter term than the standard 25-year period offered by most lenders will result in lower interest payments over the life of the loan. Because short-term loans have lower interest rates, which means you pay less interest overall.

UAE property investors prefer to be owners than pay ‘landlord mortgages’

Many people in the UAE are contemplating whether they should rent or buy. While the current market conditions favor purchasers, it is still a financially significant decision to forward with the transaction. It is the right time to acquire a home in Uae as property costs are economical. However, people are hesitant about long-term stays due to a lack of understanding.

Understand the market, and make a short list of alternatives based on budget and practicality. Find a trustworthy real estate agent to assist you through the process. As this is a significant financial commitment, prospective homebuyers must ensure that fully grasp the terms and fees involved. Ultimately each individual’s financial security is at stake in the end.

Affordable real estate services are favored by taxation, which helps in enhancing earnings even more. There is no property, income, or inheritance tax in the UAE, nor are there any stamp fees involved with purchasing a home. The only fee that applies is a 4% Dubai Land Department (DLD) transfer fee on the purchase price. This is frequently covered by the buyer and is a one-time cost compared to the annual taxes avoided. The favorable taxation conditions are unquestionably an advantage when considering purchasing property rather than renting.

The crucial factor in deciding whether to rent or buy property in the UAE is how long you want to stay in the country. If you are one among the mass, who have come to call it home, crunch the numbers, conduct your due diligence, assess market circumstances, and become a house owner in the lucrative UAE real estate market.

On the other hand, if you are unsure about the future and are open to relocation, rent a magnificent home in the UAE until you know what lies ahead.

For any enquiries or information, contact ask@tlr.ae or call us on +971526443004