Getting a Home Loan can be a long and confusing process with numbers & documents of all sorts right in your face. Knowing some key aspects will help you stay focused on choosing the right Home Loan.
There are broadly three types of cost you incur on a Home Loan in UAE – initial cost, insurance & monthly installments (EMI).
The Initial Cost is what you pay one time. Typically, Banks in UAE charge a processing fee (as a % of the Loan Amount), property valuation charges & legal fee.
Another big cost is Insurance that provides a cover for your life and your mortgaged house. An annual premium has to be paid for Life Insurance (as a % of Loan Amount) and Property Insurance (as a % of Property Value).
The third and most important component is the EMI. There are two key factors that determine the EMI:
1. Interest Rate – Lower interest rates result in a low EMI. Interest Rate is the primary factor for your decision as even a small difference in interest rates can save you thousand of Dirhams (AED). It makes sense to shop around for Banks that can offer you a low interest rate. If the rates are at all time low, you should consider locking in the rate by opting for a fixed interest rate at least for some time period. (Compare interest rates offered by various Banks)
2. Time Period - Banks in the UAE lend up to a maximum of 25 years. A short time results in lower interest cost but a higher EMI during that period. So keeping in mind what amount you can afford to pay as EMI, keep the loan tenor as short as possible. (Calculator: How much can I afford)
Lastly, if you see any fee or charges that you don’t understand be sure to ask you Bankers. Understanding these key aspects should help you in making an informed decision.
Contact us for any queries at firstname.lastname@example.org. Our experts will help you identify the bank best suited to your profile. They will guide you through the application process and can even handle the paperwork for you.