Hello, future homeowners! Welcome to LOANS & HOMES, where we make the journey to homeownership as smooth and stress-free as possible. If you’ve ever felt overwhelmed by the mortgage process and its jargon, believe us, you’re not alone. That’s why we’ve created this comprehensive guide to help you navigate through the mortgage landscape in the UAE with ease and confidence.
LOANS & HOMES – The Best UAE Homebuyer’s Lingo Guide
We get how exciting it is to buy your dream home! What a lot of future homeowners don’t know, though, is how challenging the process is.
Negotiating… figuring out if your salary is enough… wondering if you have enough papers… looking around comparing interest rates…
We’re barely scratching the surface of the weeks you’ll spend searching for answers and facing new obstacles.
And the jargon… don’t get us started on how confusing it gets! Fear not, for we’ve compiled a list of key mortgage jargon specific to the UAE just to help you out.
Below are the most used and confusing jargon you’ll find in your journey to own a home in the UAE. Read carefully and bookmark this post for later!
Credit Score in the UAE
Your credit score is a reflection of your financial health, and in the UAE, a score of 700+ is considered favorable by banks.
This score is calculated based on various factors, including your repayment history, active liabilities, and credit card utilization.
Make sure to keep your financial habits healthy to maintain a good score!
AECB Report: Your Financial Report Card
The Al Etihad Credit Bureau (AECB) Report is essentially your financial report card, showing your credit score, financial history, and all active liabilities within the UAE.
Banks use this report to assess your creditworthiness, but you can also download your own report via the AECB mobile application.
EIBOR: The Pulse of UAE Interest Rates
The Emirates Interbank Offered Rate (EIBOR) is the benchmark interest rate for lending between banks within the UAE. It’s a daily reference rate, published by the UAE Central Bank.
It plays a crucial role in determining the interest rates on your mortgage.
Fixed-Rate vs. Variable Rate: Stability or Flexibility?
A fixed-rate mortgage offers stability with a constant interest rate for a specified period, unaffected by EIBOR fluctuations. On the other hand, a variable rate mortgage offers flexibility, with interest rates that change according to EIBOR movements.
Life Insurance and Property Insurance
Life insurance ensures that your mortgage debt is covered in the event of death or permanent total disability, providing financial protection to your loved ones.
Property insurance protects your home against various risks, including fire and natural disasters.
Both insurances are typically arranged by the bank as part of the mortgage process.
Downpayment: Your Stake in the Game
The downpayment is the initial amount you pay upfront when buying your home, ranging from 15% (UAE Locals) to 20% (Expats) of the property sale value.
This payment solidifies your commitment and is a crucial part of the home-buying process.
Handover Payment: Crossing the Finish Line
The handover payment is the final amount due to the developer once your property is complete.
If you’ve made payments to the developer during the construction period, these will be considered as part of your downpayment. No need to be concerned – we’ll help you find the right bank to help with this handover payment. You’re covered!
LTV (Loan to Value): Measuring Your Loan
The Loan to Value ratio represents the percentage of the property value that your loan covers. It is a crucial factor in determining your eligibility for a mortgage.
Getting the Green Light: Pre-Approval and Final Approval
A pre-approval is an initial nod from the bank, confirming your eligibility for a home finance amount, usually valid for 30-60 days.
The final approval comes after the property valuation and is the last step before your Facility Offer Letter (FOL) is issued.
MOU, SPA, and Title Deed: Making It Official
The Memorandum of Understanding (MOU) is the property sale contract between you and the seller, while the Sales & Purchase Agreement (SPA) is used when buying directly from the developer. The Title Deed is the official document proving property ownership.
Trustee Office in Dubai: Your Property’s Guardian
If you’re buying property in Dubai, the Trustee Office oversees property ownership transfers and facilitates mortgage-related processes.
Equity and Amortization: Building Your Wealth
Equity is the difference between your mortgage debt and the current property value, and it increases as you pay off your mortgage. Amortization refers to the process of gradually paying off your mortgage through regular installment payments.
Settling Your Mortgage: Partial and Full
Partial Mortgage Settlement allows you to pay a lump sum amount toward your mortgage loan, potentially reducing future interest payments and the loan duration.
Full Mortgage Settlement means clearing your loan before the term ends, which could involve additional fees.
Need Help? Welcome to the LOANS & HOMES Family!
Now that you’re equipped with the knowledge of mortgage jargon in the UAE, you’re one step closer to making informed decisions on your journey to homeownership.
Remember, the LOANS & HOMES family is here to guide you every step of the way, ensuring a transparent, guided, and enjoyable experience. Here’s to making your homeownership dreams come true!
