How Property Investors Can Benefit from Adjustable Rate Mortgage in UAE

Sun, 20 Dec, 2020

Mortgage Financing in the UAE

The United Arab Emirates is one of the biggest real estate and property markets in the Middle East. To make investments easier for its citizens as well as foreign expats, mortgage financing in the UAE has been introduced as one of the most vital financial systems in the country. This has allowed residents and expats to manage their property investments and personal finances in an easy and convenient manner. UAE has also introduced some of the most cutting-edge and flexible mortgage options in the country to ensure that people of diverse financial standings may find it accessible to access properties in the country.

What Is An Adjustable Rate Mortgage 

An adjustable-rate mortgage (ARM), also known as a variable rate mortgage, is a type of mortgage that has an interest rate that has a tendency to increase or decrease over time, depending on various market factors.

An adjustable mortgage rate can be very useful for an investor who wants to take out a mortgage during times when the interest rates are low or who want to take advantage of any decrease in the EOBIR rate. They are also a better option for medium and long-term mortgages since it helps to evade high reversion rate at the end of your fixed period.

Typically, traditional fixed-rate mortgages consist of an interest rate that is agreed upon during the closing time. This fixed rate remains constant throughout the tenure of the entire mortgage. Having an adjustable mortgage rate allows the lender the flexibility of various interest rates during the duration of the loan.

Adjustable-rate mortgages typically start with a very low rate of interest, which is sometimes even lower than the market rate. However, this rate will increase or decrease during the loan period. Most of the time, adjustable-rate mortgages have an initial period during which the interest remains fixed. Once this period expires, the lender has the option to adjust the rate, typically after six months or 12 months. However, in some cases, the interest rate may also be adjusted monthly.

Adjustable-Rate Mortgage (ARM) Compared With Other Mortgage Types In UAE

The calculation of the interest rate of a mortgage is determined by several factors and can vary by huge extents. One of the main factors is the down payment, which is the percentage of the price of the property that is paid in advance. The rest of the money is then paid out in easy instalments (EMI). Let's check out some of the different types of mortgages in the UAE.

Fixed-Rate Mortgage

A fixed rate mortgage is one of the most common types of mortgage in the UAE. This type of mortgage keeps the interest rate fixed throughout the tenure of the entire loan. This gives investors the advantage of knowing the exact amount of monthly repayment — something which is uncertain with an adjustable-rate mortgage.

The mortgage for this type is calculated based on the fixed-rate period and is considered one of the best mortgage options for people seeking home loans.

Capped Mortgage

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A capped mortgage is quite similar to a variable mortgage but it comes with a few more benefits. A variable mortgage has a certain level of uncertainty which creates a problem for investors since they do not know how high their interest rates could rise and how much they will have to pay.

As a result, financial institutions in the UAE impose a certain limit up to which an interest rate can go. This is known as a “cap” and allows investors to know the maximum amount of EMI they will have to pay at any given time. Some financial institutions that offer capped mortgages also link it to treasury bills.

Offset Mortgage

An offset mortgage is an innovative and special form of mortgage provided by financial institutions in the UAE. With this type of mortgage, the initial amount varies since the lender has the option of depositing and withdrawing funds. In addition, the rate of interest is charged only on the principal amount. This allows lenders some flexibility and leeway when repaying their loans.

DAMAC Mortgage Assist

DAMAC is one of the leading property developer names when it comes to the real estate industry in the UAE. As a property investment company in Dubai, DAMAC has garnered fame not just at national levels but also at international levels because of its state-of-the-art residential, commercial, and hospitality projects.

DAMAC projects are regarded as world-class and emphasize luxury and convenience. It is also the key reason why so many investors look to DAMAC to give them a quality lifestyle.

To make investments in its properties easy and smooth, DAMAC has now partnered with UAE’s top financial institutions to bring you the best mortgage rates and terms for property investment. Through DAMAC Mortgage Assist,  you can get access to qualified and experienced real estate professionals who can help you in your mortgage process every step of the way.

Find out more about DAMAC Mortgage Assist here.

 

DAMAC Partners With ADIB Bank For Best Mortgage Options

Thanks to the top-of-the-line mortgage plans, DAMAC Properties have now become even more appealing to investors. Through its partnership with Abu Dhabi Islamic Bank (ADIB), DAMAC can now provide the best mortgage deals for homebuyers in Dubai and other cities of UAE.

Potential residents can enjoy the option of finding highly attractive and lucrative real estate properties with the help of DAMAC mortgage deals with ADIB bank. In addition, DAMAC and ADIB bank will both notify the investors if the rate rises. Here are some of the core highlights of these services:

Extended Tenure

The maximum duration for a mortgage loan provided to residents in UAE is 25 years. This allows investors sufficient time to pay off their debt. With this, you can easily buy a flat or villa at your favourite location in an easy way. Your interest rates will also adjust depending on the terms of the loan.

Lowest Interest Rates

In partnership with ADIB, DAMAC allows you to enjoy incredibly low mortgage rates starting from just 1.99% for seven years for potential residents. This allows investors to easily and conveniently pay the EMI on their mortgage and ensure they pay out the full amount within the deadline with ease.

No Additional Costs or Hidden Charges

The best part is that DAMAC does not request any additional costs such as evaluation or processing fees. This means that your monthly payments remain low and you can easily acquire your dream property.

Exceptional LTV Ratio

If you are a citizen of the UAE, you can obtain mortgage financing for up to 85% of the total value of your property. Expats also have the opportunity to borrow loans of up to 80% of the property value.

Why Choose DAMAC Mortgage Assist?

DAMAC Mortgage Assist can offer you golden opportunities to help you finance your real estate properties along with the best mortgage rates in Dubai as well as other cities of UAE. Moreover, DAMAC Mortgage Assist makes it extremely convenient to take out a mortgage. With this feature, you can use the following benefits:

 

  • Flexible policies that allow you various benefits of an equity release
  • Smooth and seamless mortgage process with approvals in less than 72 hours
  • 24/7 support by experienced and qualified financial advisors
  • You get preferential terms and conditions, no matter what property you buy
  • High chances of making a direct purchase with minimal paperwork
  • No hidden charges or commissions
  • Various modes of a payment for your convenience.

Mortgage Calculator

A mortgage calculator is one of the easiest ways for investors to figure out some of the most essential aspects of property investment, including the interest rate, down payment and EMI. Through DAMAC, you can enjoy the use of a mortgage calculator which can help you estimate every major detail of your mortgage.

DAMAC Calculator is very intuitive and easy to use. All you need to do is to pick your property price, down payment, interest rates, and loan period. This can save investors a lot of time and effort that they would spend contacting the mortgage advisor who would advise them on the essential aspects of mortgage financing.

 

Terms and Conditions for Adjustable Rate Mortgage in UAE

Before you apply for the Adjustable Rate Mortgage, it is important that you consider the terms and conditions of the property. In UAE, mortgage terms and conditions are flexible. Some of them are provided below:

  • The UAE mortgage laws define the regulations for mortgage contracts. Any mortgage taken out needs to fall within the prescribed relevant guidelines.
  • Non-refundable charges of AED 1000 are charged for the application process.
  • The Real Estate Regulatory Agency will register your mortgage. Investors should submit all necessary documents during the initial registration period. Non-compliance can invalidate your mortgage.
  • The property that is taken out under mortgage needs to be legal. The buyer should also be legally eligible to purchase Dubai property by adhering to UAE’s regulations.

Frequently Asked Questions

What are the different types of mortgage loans in UAE?

Investors can benefit from various types of mortgages in the UAE, including adjustable-rate mortgages, fixed-rate mortgages, capped rate mortgages, and offset mortgages.

How high can an adjustable-rate mortgage go?

The cap for adjustable-rate mortgages is typically 5%. This means that the rate cannot be more than 5%. However, depending on the unique conditions of each mortgage, the cap may also be higher.

What are the mortgage loan interest rates?

From a financial perspective, the mortgage loan rates in the UAE are typically between 2.99% and 3.61%. Investors have the option to compare different mortgage rates and their terms and condition and select the one they deem the best. 

At DAMAC, we can help you find the best mortgage rates in Dubai.

What is better: fixed or adjustable-rate mortgage? 

There is no clear-cut answer about which mortgage option is better. The main difference between them is that for fixed-rate mortgages, the interest rate is pre-determined and does not change with time. On the other hand, with adjustable-rate mortgages, the rate of interest varies. The interest rate can start from a lower rate as compared with the fixed mortgage rate. Factors like loan terms, loan duration and index rate all play a role in determining the rate of interest.

What does adjustable-rate mortgage change to?

Adjustable-rate mortgage decreases or increases based on an index, plus a fixed margin. The index rate is prone to changes; however, the margin typically stays the same. For example, if the index is 5% and the margin is 2%, the interest rate on the mortgage will be adjusted to 7%.

For more information about DAMAC's mortgage and investment options, please fill in your details in the registration form.

 

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