It really pays to do your homework

Choosing between a variable and fixed interest rate is just one of the steps in getting the right mortgage. When shopping around for the best deal, it pays to keep several points in mind.

According to Philip Ward, CEO of Abu Dhabi Finance, it is vital that a potential home-buyer does his homework and becomes acquainted with unknown terminology or unfamiliar processes. Asking a lot of questions and demanding clear and straightforward answers should help put one on the right track.

"You should always ask for a quotation in writing and compare all aspects of the mortgage, not just the interest rate. If you are speaking to several mortgage companies, I would advise you to ask each of them about their application, processing and valuation fees, as well as any other related charges," Ward advised.

Jesse Downs, director of research and an advisory at Landmark Advisory, said it is equally important that a home-buyer speaks with various lenders and independent mortgage brokers who can provide a good overview of what's on the market.

Responsibilities

When it's time to sign on the dotted line, mortgage applicants are strongly advised that they fully understand their rights and the responsibilities they are agreeing to in the contract. If they don't, they should seek legal advice to address any doubts. "Additionally, review the history of the mortgage lender to understand how they have dealt with their customers during the difficult years of 2009 to 2010," said Downs.

For Jean-Luc Desbois, managing director of Home Matters, it's best to go to a licensed independent advisor.

"They should have access to all or most of the banks. How often would you go into a shop that sells one product?

Getting a mortgage is the same. Give yourself the best choice and get a mortgage that meets all of your needs, instead of having to make sacrifices on your requirements by shoe-horning yourself into one bank's product," he pointed out.

Also, there are numerous charges that need to be paid for, even before a loan is granted, so it's important to set aside a budget for these.

In most cases, there's an application fee that is paid up front and is non-refundable.

This can be off-set against the processing fee, which is generally around one per cent of the total loan amount. Some lenders allow the fees to be added to the total loan amount.

Processing fees

"Our processing fees are one per cent if paid over time as part of the mortgage repayments, or 0.75 per cent if the full fee, after deducting the application fee, is paid up front. The valuation fee is typically around Dh3,000.

"All lenders have slightly different processes, and I recommend that you avoid bundled charges so that you don't end up paying the full fees even if the application is unsuccessful," Ward explained.

There are also other costs that need to be considered, such as mandatory life insurance and a one-off registration fee, around 0.1 per cent of the value of the property, which has to be paid to the government.

If you are considering buying a property in the secondary market, take into account that you will have to set aside funds for the real estate agent commission and fees, as well as transfer charges.

Mortgage checklist

Ishrat Kiyani, head of premier and wealth management and mortgages at HSBC said there are basic questions that a home-buyer needs to answer before entering into a mortgage deal:

•  What is the time scale that has been agreed to purchase the property, and does this match the time scale of the financier?
•  Is the purchase price realistic for the area?
•  Which companies are offering to finance a particular project? What type of finance do they offer - Islamic, conventional or both?
•  What fees and deposits are to be paid by the purchaser from their own funds, and are these accessible at the time of agreement?
•  Is there a requirement for documentary evidence to be sent or verified from overseas and the time lines to achieve this in relation to the agreed transfer date stated in the buyer-seller sales agreement?
•  Is the property being purchased directly from a developer, or is there a current owner and does this person have existing finance on the property?
•  Is the property under construction, and who will be managing the payments of construction costs? Are these to be paid directly to the developer, or managed through the new accounts?
•  What are the exact financial terms which a customer is being offered?
•  If life insurance is being taken, is there sufficient time to attend any required medical examinations, for the company to asses prior to taking a loan?

Have your say

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