Types Of Home Loans/Mortgages Available In Dubai

Types Of Home Loans/Mortgages Available In Dubai

Having their own home or property is the ultimate dream of many; most people want to invest in real estate in Dubai as it's the hottest city to invest in right now. However, buying a property in a foreign city is as easy as it may seem. Buying a property in Dubai can be hard, complicated and very lengthy for an ex-pat. It isn't a walk in the park, from finding a property to narrowing down all options to getting financial aid and all the paperwork done. 

Apart from all this, getting a loan for purchasing a home isn't super easy. Yes, there are many options available, but one should know which option will suit him the best. Despite the fact that many loan options are available in Dubai, making the right choice is what matters the most. You can't have a profitable ROI if you keep paying instalments for your home, can you? Hence finding the best loan option, interest rate as well as a time limit to pay that loan is crucial. 

The first thing you need as an investor is to get the correct type of loan from the right bank or another source. Mortgage loans come in various forms and with a lot of different payment options. Knowing which one you need is the most important step. As there are many options, banks and financial institutions offering all kinds of home loans, investors can choose their best option as per their preferences and eligibility. For any novice, this is a hard choice to make; however, here is a detailed account of all loan options. This will help you understand which one you need. 

What Is A Home Mortgage?

A mortgage is a home loan that you take from a bank or an institute against your home. There are easy instalments as well as interest every month, and if you fail to make these payments, the house is seized by the bank or the institution you have borrowed from. A mortgage is one of the most convenient ways to pay for your dream house if you are short on cash or finance to buy a house immediately. In several years, with the payments, you will have the house in your name. 

Type Of Mortgages Available In Dubai For Property:

The beauty of Dubai isn't only in its luxurious lifestyle or modern infrastructure, and it is also in the feasibility and convenience that it provides to its residents. You can take out any kind of mortgage available as per your need and budget. This is the main reason most people prefer to invest in Dubai than any other city in the world. The interest rate of these loans and mortgages depends on the time limit, size of the loan as well as a form of the mortgage. Here are different kinds of home loans and mortgages available in Dubai

Fixed-Rate Mortgage (FRM)

As the name suggests, the interest rate doesn't fluctuate; it stays fixed just as decide when taking the loan out. The pre-agreed period of such loans is generally 5-years, and the rate stays the same throughout. This type of loan is predictable, the time of payment is fixed as well, and there are many benefits of taking out a fixed-rate mortgage. However, it's suggested to seek out legal advice before taking out a fixed-rate mortgage as many can predict the market and tell you whether the rates will fall or not. If the rates do fall, you will be in an adverse position if you had opted for Fixed Rate Mortgage. But the wind can turn in your favor too; when the rate rises, you need not worry, as you will be paying the same low rate decided earlier. 

As it can go either way, an expert will be able to help you see the future with his experience of the market. Here are a few benefits of a Fixed-rate Mortgage. 

• You can easily time your budget and payments, as the rate is fixed, and there will be no guessing game.
• The increase in interest rate will not affect the homeowners as their rates will remain the same throughout the payment course.
• The borrower can easily budget his money, as they will not precisely how much they need to pay each month. 

Variable Interest Rates (VIR)

Now, the opposite of Fixed Rate is Variable Rate, where the rate, as well as the payment, changes over time, depending on the ups and the downs of the market. Such a type of loan is always a gamble, as the wind can go either way. You will either end up paying less or more according to the market. A good understanding of the market, as well as financial liquidity to handle any increase in repayments, are two things you will need to have to take out such loans. 

Apart from these two common types of loans, you can also get the following home loans for your property in Dubai. 

Capped Mortgage:

In the case of a capped mortgage, there is a predetermined limit set on interest rates exceeding a certain point. This means that if the rate goes down, you will benefit, but if it increases beyond a certain point, you will not be affected. This is an excellent option for those who aren't keen on taking the fixed Rate mortgage but don't want to get affected by the floating rate interest as well. 

Offset Mortgage:

Offset Mortgage is pretty new in the market and isn't being offered by many banks or financial institutions. You can connect various accounts such as current, savings, loans etc., to pay your instalments. This way, you end up paying a lower interest rate on your mortgage. 

A mortgage with a Discounted Rate:

This is perhaps the best type of home loan or mortgage available in Dubai. But it's not for all; this type of loan lets the borrower pay a lower sum on its variable interest rate. However, this cut doesn't apply to the whole mortgage, and the borrower will have to pay a variable rate till the end, but it's still a better choice than the rest.

Bottom Line:

Knowing in detail about these home loans and Mortgages helps when you buy your own property in Dubai and are short on funds.

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