Dubai
There may be lots of interested buyers out there scouting around for a property in Dubai. Intention may be one thing, but for them to get all of the necessary mortgage approvals to seal the deal is an altogether different issue.
Which is a most unfortunate state of affairs given that interest rates remain firmly anchored to historic lows. (Not necessarily for long, if the US finally makes a push to raise rates from their near zero levels, and something which the Federal Reserve has been indicating for some time.)
These days, mortgage deals are being advertised at or around the 4 per cent mark, but a first-time buyer will need to clear multiple approval stages before he gets to see the money. (The UAE Central Bank’s strict mortgage cap guidelines sure are having an impact.)
But for those with existing mortgage exposures, now may be a good time to go in for a refinancing. “Banks are giving very competitive offers to attract clients from other banks,” said Chandrakant Whabi, CEO of Acrohouse Properties. “Clients should make use of this window and reduce the cost of their mortgages, especially in cases where banks are waiving the processing fees for loans that are being transferred.”
There are quite a few banks quite willing to take up refinancing deals. Given that all of a customer’s credentials and track record are already there, clearing the approval processes also becomes easier.
What exactly should a mortgage holder look for in such deals? “Those who had taken a higher loan-to-value (LTV) earlier can shift their loans to a lower LTV based on the new mortgage cap,” said Whabi. “Their property would be revalued and with the values rising, it’s possible for them to qualify.
“However, not every client would be able to use of this opportunity as many mortgage loan will have a penalty rate for early settlement, which in certain cases can go up if the early settlement is due to a transfer to another bank.”
And would the customer be better off locking in a fixed rate rather than a variable one? “Going for a fixed or a variable rate is very much a personal choice,” said Ambareen Musa, CEO of Souqalmal.com, the financial planning portal. “It depends on your thoughts on how interest rates will move or how long you will be taking the mortgage for.
“The choice also depends on the country’s economic circumstances, whether it is a buy-to-let property or for self-use — all these factors would generally affect the decision on fixed vs variable.”
