How to Benefit from Adjustable Rate Mortgage in UAE
Author: Sadiq Suleman
Mortgage Financing in the UAE
From a business perspective, Mortgage financing in the United Arab Emirates (UAE) has been one of the most essential financial systems. It has allowed expats and residents to manage their personal finances in a convenient manner. You could also find one of the most advanced as well flexible mortgage options in UAE. This can help to make sure that all the essential properties in UAE could be in your reach.
What is an adjustable rate mortgage
From a financial perspective, an adjustable rate mortgage, also known as variable rate mortgage, could be termed as a mortgage with an interest rate that could be decreased or increased from time to time. This could also depend on different factors.
An adjustable rate mortgage (ARM) could well be highly beneficial for someone that wants to take out a mortgage during tenure when interest rates are low, specifically low interest rates and also if the adjustable rate mortgage does have a longer period for the payment of fixed rate interest.
Usually the traditional fixed rate mortgages tend to have a rate of interest that could be agreed on a specific closing time that could well remain in a place for the entire loan tenure. Having an adjustable mortgage rate could allow a lender for interest rate at various points during the loan duration.
Adjustable-rate mortgages usually start by providing a comparatively low rate of interest. This could well be lower than market rate. However, this rate could well decrease or increase during the loan period.
Most of the times, adjustable rate mortgage tend to have an initial period in which the rate of interest is usually fixed. It is than followed by a specific period in which a lender has the option to make an adjustment for the rate of interest. Most of the adjustments usually occur either annually or every six months. However, sometimes the rates are also adjusted on a monthly basis depending on the adjustment periods.
Adjustable rate mortgage (ARM) compared with other mortgage types in UAE
When it comes to interest calculation, a mortgage loan usually varies to a huge extent. The essential factor in this regard is that a fairly small percentage of this price can be paid for the purpose of down payment. However, the rest is usually paid by the means of easy installments (EMI). We will now have a look at some of the different mortgage types in UAE.
Fixed Rate Mortgage
From a financial perspective, fixed rate mortgage could be termed as one of the most commonly provided types of mortgage. It focuses on keeping fixed interest rate throughout the tenure of the entire loan. One of the key benefits of a fixed rate mortgage is the EMI for complete term tends to be fixed.
As a result, there is an option to make a plan for your financials without any problems due to fixed interest rate. The mortgage is calculated on the fixed rate period. Home buyers can also opt for monthly mortgage payment when they select a fixed rate mortgage. This is one of the best mortgage options for individuals seeking home loan.
Capped mortgage is relatively similar to variable mortgage but it has an added advantage. It has a certain level of uncertainty. This could well create a problem for potential buyers if they don’t have any awareness of the interest rates that they are required to pay.
As a result, service providers and financial institutions do impose a certain limit to it but they do notify the home buyers regarding the increase or decrease in interest rate. This helps an individual to know the maximum amount they may be required to pay as interest. Some financial institutions offering capped mortgage also link it with treasury bills.
Technically, offset mortgage could be defined as one of the most modern and unique forms of mortgage that could be provided by financial institutions. Within this context, the initial amount tends to be variable.
This is because individuals have the option for depositing and withdrawing fund at their own convenience. The rate of interest is only charged on principal amount. This allows potential debtors with a significant amount of freedom for loans.
DAMAC’s Mortgage Assist
Within the real estate industry of UAE, DAMAC is regarded as one of the most prominent names. As a Property Investment company in Dubai , DAMAC has successfully garnered global fame due to its state of the art hospitality and residential projects.
All of the projects delivered by DAMAC are regarded as world class as a result of its emphasis on the luxury and convenience of potential residents. It is also one of the main reasons why the projects of DAMAC are sought-after by individuals looking for a quality lifestyle.
DAMAC mortgage offer with ADIB bank
The real estate properties offered by DAMAC become more appealing when they are available through high quality mortgage plans brought by DAMAC. It has partnered with Abu Dhabi Islamic Bank (ADIB) for providing the possible mortgage deal for various home buyers.
The properties by DAMAC are also available through some of the best possible mortgage plans in UAE. Potential residents have the option of finding various highly attractive real estate property investment options in the deal. They are jointly provided through DAMAC mortgage offer with ADIB bank.
Home buyers that plan to move can reap benefit from this plan. DAMAC or ADIB will notify home buyers if the rate rises. Here are some of the core highlights of the service:
The maximum possible tenure of loan provided to residents is 25 years. Through these features, getting a villa or flat in your favorite project becomes much easier than ever. Interest rate adjusts depending on the term of loan.
Lowest Interest Rates
In collaboration with ADIB, DAMAC provides an extremely low interest rate of only 1.99% for 7 years to potential residents. It provides you sufficient time period to cover the life of the loan.
No Additional Costs or Hidden Charges
The service provided by DAMAC does not have any additional costs such as processing or evaluation fee. This makes sure that you have to pay a very low cost for acquiring a loan to obtain your dream property.
Exceptional LTV Ratio
UAE citizens can obtain mortgage financing for nearly 85% of the total property value. Expats can also obtain loans of nearly 80% of the total price of the property.
Why Choose DAMAC Mortgage Assist?
DAMAC can help you in providing an opportunity that could well help you to finance your individual properties along with the best possible rate of mortgage in Dubai as well as other cities across UAE. Moreover, DAMAC Mortgage Assist could also help you for making the entire process highly convenient as well as hassle-free for potential buyers. You can get the following benefits by utilizing this feature:
- Flexible policies for the purpose of equity release
- Fluent process along with approvals in less than 72 hours
- Round the clock support by experienced financial advisors.
- All buyers getting preferential terms and conditions.
- Possibility of having a direct purchase with minimum paperwork.
- No commissions or hidden charges.
- Special modes of payment that can make sure the highest convenience.
From a technical perspective, the mortgage calculator is the easiest method for any individual that wants to find out the most essential aspects of a property Investment Method before an application for mortgage is made. DAMAC provides this unique trait through which potential users are able to get a detailed estimation of nearly every detail.
This also includes EMI and down payment. For individual users, the DAMAC calculator is relatively easy to utilize. Moreover, it can also save users the effort and time involved for the purpose of contacting a mortgage advisor that can help to guide potential users about essential financing aspects.
Terms and Conditions for Adjustable Rate Mortgage in UAE
Before applying for Adjustable Rate Mortgage, it is highly recommended to first have an idea regarding the terms and conditions. In UAE, the terms and conditions tend to be highly flexible. The terms and conditions are provided below:
- Regulation for mortgage contracts is done through the UAE mortgage laws of UAE. Moreover, it should also fall within the relevant guidelines.
- Charges of AED 1000 (non-refundable) will be applicable for the application.
- The mortgage is required to be registered through the Real Estate Regulatory Agency (RERA). All the necessary documents should be submitted during initial registration. Not being able to comply with the rules will make the mortgage void.
- It is essential that the property to be mortgaged is legal. Moreover, the buyer should also be eligible legally for purchasing the Dubai property by adhering to UAE’s regulatory regulations.
What are the different types of mortgage loans?
Within the UAE, the different types of mortgages includes fixed-rate mortgage, adjustable rate mortgage, capped rate mortgage, discounted rate mortgage and offset mortgage.
How high can an adjustable rate mortgage go?
For adjustable rate mortgage, the cap is usually five percent. This means that the rate may never be more than five percent or higher than the initial rate. However, many lenders could well have a higher cap.
What are the mortgage loan interest rates?
From a financial perspective, the mortgage loan rates in UAE can vary from 2.99% to 3.61%. Users have the option to compare mortgage rates and select the best possible mortgage interest rates in Dubai. DAMAC can help in providing you the best mortgage rates Dubai has to offer.
What is better fixed or adjustable rate mortgage?
It is difficult to state which mortgage option is better. The main difference between a fixed rate and an adjustable rate mortgage is that for fixed rates, the rate of interest is set when an individual take out the loan and it does not change.
However, with an adjustable rate mortgage, the rate of interest can fluctuate. Several ARMs can start at a lower interest rate when compared with fixed rate mortgages. Other aspects such as term of the loan, life of the loan, index rate etc. should also be taken into consideration.
What does adjustable rate mortgage change to?
From a mortgage point of view, adjustable rate mortgage can increase or decrease primarily based on an index plus a set margin. Even though the index rate can change, the margin usually stays same. For instance, if index is 5% and margin is 2%, rate of interest on the mortgage could be adjusted to 7%.