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Buying a house is probably the largest investment most people will make. Whether it's a cottage in the country, a penthouse in the city or a villa on the Costa - in order to make your property dreams come to life you need to have your finances in order. Property mania has certainly hit Dubai and there are numerous high quality projects available from studio apartments to lavish townhouses. With new developments launched almost every week, the healthy Dubai property market is showing no signs of an imminent slow down. If you are considering buying property whether in Dubai or abroad, there are number of factors which you should consider. Here are just some questions that you should consider... What mortgage facilities are available? There are literally thousands of mortgage options when buying in Europe or the UK. In the United Arab Emirates, however, the choice of lenders is not as widespread and the options not as attractive as those found internationally. At present, typically you can borrow at 6.5% in Dirhams for the various property developments that are regularly advertised in the local press. Unfortunately, banks based overseas cannot provide lending facilities on UAE properties directly so one is confined to the locally established lenders. This situation should change in the near future. However, finance can be arranged through overseas lenders if you have assets overseas too. A number of property investors with assets overseas have taken advantage of favourable international interest rates. For example, someone with property in the UK may be able to release equity to a maximum of 80% of the value of their property (less any outstanding mortgage) to finance all or part of their property purchase in Dubai. Interest rates can be secured as low as 2.99% in £ terms as opposed to 6.5% in Dirhams locally. One should be aware of the additional costs for arranging finance - your bank may levy a fee and once again international lenders tend to offer very competitive terms. Valuation fees, Brokers Costs, Protection fees, legal/conveyancing and in some cases planning permission can all add to the costs. If you do not have overseas property to obtain finance then another form of collateral could be an investment portfolio which could be used as security to obtain a loan. Once again, depending on the assets within the portfolio, a bank would be willing to offer a loan using the portfolio as security. This alleviates having to liquidate assets in a portfolio which in turn could be making sufficient returns to meet the interest payments. Obviously one should be aware of the currency differential but on the whole the savings in interest are so great that the option of overseas mortgages are really worth considering. It is worth exploring all the options and seeking independent advice. Since there are so many international mortgage solutions available, get the one that is right for you. If you do not have assets elsewhere then your options are limited to those offered by the lending terms of the local banks of the UAE. Do I need to get insurance? Most lenders (i.e. banks and building societies) will require some form of protection for the loan. This makes a lot of sense since you want your property paid off in the event of your death or diagnosis of a serious/terminal illness. Banks on the whole do not like repossessing property and would prefer the loan to be repaid from an insurance policy should a serious event occur. Similarly, if you had to sell the property to pay the loan in the absence of a policy, the value of the property may have fallen to a level below the outstanding loan amount. Moreover, if the reason you cannot pay your mortgage is because you are terminally ill, you certainly do not want to be homeless as well. With critical illness affecting 1 in 4 of us at some stage in our life, many lenders will require that you have sufficient protection to cover the amount of loan you have secured. Seeking the right insurance is key since it comes in many forms. Whole of Life, Term, Endowment are all widely available in the UAE - get the right advice to determine which one is right for you. Similarly, it pays to use a Broker since they can normally secure terms well below that which is offered directly by most lenders. Remember, if your loved one passes away unfortunately the bills do not go with them - avoid the financial trauma and have yourself correctly protected. Which property should I go for? We do not select or recommend property developments to our customers - we just arrange the financial aspects of the deal. It pays to select an agent once again who can run you through all the developments available so the right solution is selected. Pick someone who has a good experience of the local market and is not constrained to one or two developments. Local knowledge is key and a good agent should be able to guide you through the whole process of your purchase. How do I go about buying? Once you have set your heart on the property you require there are going to be a number of issues that need addressing. Here are just a few to run through...
Since buying a house is generally the largest investment most of us will ever do, it makes sense to explore all your options so you can be sure that what you are about to do will meet your needs now and for the foreseeable future. Seek the professional services of a good agent who is willing to spend time understanding your profile so the right properties are selected for you. Likewise, take guidance from a lawyer if buying locally and employ a suitable conveyancing group when buying overseas. And finally, secure sound financial advice from an independent source so the various aspects (pitfalls) to property finance are discussed in full. Happy house hunting!
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