Dubai is known for its deserts, serene beaches, big golf courses, grand shopping malls and lush landscaped gardens. Apart from these, it is famous for its spectacular Dubai properties sector which is second to none with respect to providing luxury, comfort, convenience and quality lifestyle to their residents.
Gone are the days when investors were holding off their investments and waiting for the right time to invest in the sector. The recent reports indicate that the dust of financial crises from the sector has been settled to a large extent and we can expect better times ahead. This is why many astute investors once again are eyeing Dubai property sector for investment. They know buying in low market and selling in up market can give lucrative non-taxable capital gains.
Data reveals that over the last two years, mortgage inquiries have been increased in Dubai owing to the low price of property and low interest rates in the market. But beware! Don’t get your emotions involved while purchasing real estate finance in Dubai. Don’t make big costly mistakes that can ruin your happiness of having a home in Dubai. In order to be successful with your mortgage in Dubai get to know what factors can lead you to failure.
Hiring Wrong Agent!
If you are not familiar with Dubai property market trends, you probably need an agent to suggest you which property exactly matches your needs and budgets. However, if you don’t conduct background checks on agents, you could be tied up in a wrong deal. There is a chance that an agent would recommend a lender, who is likely to pay the agent some commission for that, which is illegal. In order to be on the safe side, you must work with agents recommended by some trustworthy person and investigate their relationship with lenders in advance.
Applying for ARM!
Borrowers prefer adjustable rate mortgages over fixed rate mortgages because they offer fixed low rates during initial 2 to 5 years of the loan. After expiration of agreed term, interest rate on such loans increases with market rate. Those who apply for such loans think if interest rate would increase in future, they would refinance the mortgage at a lower rate and free their equity. This is wrong since it’s not necessary that interest rates would increase, decrease in them leads to inability and the costliness of refinancing.
Building Negative Equity!
Many borrowers rely on property surveys conducted by banks for finance approval. These are brief surveys that don’t indicate the proper value of a house, because they don’t take it into account its accurate condition. Many times borrowers purchase houses at a price that is higher than its actual value and pay the difference between higher purchase price and the actual purchase price to lenders. In this way, they build negative equity in the house and their deals fall apart.
Getting lured by Bina’a!
In order to uplift demand of Dubai property, government has recently launched a product for UAE nationals with the name Bina’a. This product provides 100% mortgage financing to borrowers with zero down payment. Never get tempted by such deals because having some equity in the house always makes you committed to the loan. Moreover, during the initial few years, buyers only pay interest with no equity in the house which also builds up negative equity in a house.
Not improving Credit score!
Banks are not ready to risk their money with buyers, if their credit report reflects bad credit history. If they have been bad to previous loans, failed to pay some loans installments, made multiple credit inquiries settled their debt or filed for bankruptcy, it impacts their credit rating. In order to get your application approved for all types of loans in Dubai, you must have a credit score of 140 points or above. If it’s lower than that, improve it by paying some of your previous loans or by making some accounts current.