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MORTGAGES FOR EXPATS
UAE Expat Mortgages.
It is no surprise that with 80% of the United Arab Emirates population being made up by Expats that the majority of mortgage applicants come from this demographic.
It may be stating the obvious but to qualify for an expat mortgage you have to be an expat. This means you are a resident of the UAE and legally allowed to be here. To apply for a mortgage you must hold a valid passport with visa, provide proof of employment and you must not be over the retirement age when the mortgage matures.
How does an Expat Mortgage differ from a UAE National's Mortgage?
The Central Bank of the UAE in 2013 introduced a ruling that stipulates the loan to value which an expatriate can obtain. All expat mortgages and home loans have a loan to value of 75%. This means you may borrow up to 75% of your property value. This was introduced to prevent the issues faced before 2009 when properties where being purchased and sold within months, known as "flipping" this would make the buyer a healthy profit and was a main factor leading to the property market crash.
Expats are now required to commit a 25% down payment when purchasing a house, this brings an added security to all involved and shares more risk between the bank and expat.
A UAE National's loan to value is 80% meaning they only require a down payment of 20% to begin buying property. This is possibly the biggest diference in application between an Expat and a UAE National's mortgage.
What checks can you expect to be taken applying for an Expat Mortgage?
Expats are only allowed to purchase within certain areas within the UAE. The bank will ask to know the location and developer connected with your property before approving your mortgage.
The UAE Central Bank and UAE Government are also becoming more focused towards credit checking and credit history of expats. The Al Etihad Credit Bureau was created in 2013 to help banks make judgements on mortgage applications. As an expat you are more likely to gain mortgage approval if you have a good DBR (Debt Burden Ratio). The Debt Burden Ratio is based upon your income and all outstanding debts.
If you have been in the country for more than two years and have held a credit card, personal loan or other financial product chances are you have started to build a credit history for yourself. As an expat this works to your advantage, assuming you have no bad debt your credit rating should be positive and provide additional reassurance to the banks that you are able to repay the loan.
Expat mortgages are not able to exceed more than 7 times your annual income. If you apply for an Expat mortgage and your repayments plus your existing debt is more than 50% of your monthly income you will not gain approval.
Providers will also look at your lifestyle, as an expat the concern is that you can return to your home country at anytime and default on your mortgage. If you are with a known employer to the bank and have a family in the region, this shows stability and you are more likely to gain approval on your mortgage.
How do you get the best Expat Mortgage Rates?
Banks are more likely to provide an expat with preferred interest rates if there is already a banking relationship in place. If you currently bank with the provider of your mortgage you have a better chance of approval. A step further than this is if you and your employer both bank with the loan provider. The bank is looking to reduce risk where they can, in some cases to be provided an expat mortgage your employer must be on the named list of the bank issuing the funds.
What else am I expected to do?
Almost all lenders require life insurance to approve you an Expat mortgage, this will also safeguard you or your family should anything happen. In the event of death the mortgage will be cleared on your behalf. Lenders require this life policy for protection, if your family are left with debt to pay there is a high chance they would leave the UAE with the outstanding balance unpaid. Organising an expat insurance policy generally takes in the region of 2 to 3 weeks.
Buildings insurance is also a requirement of the lender, again these are common policies and as an expat it safeguards you against any damage affecting your property.
What documents are needed to secure an Expat Mortgage?
Familiar to most expats there is a level of documentation needed to secure your mortgage in affect you must prove who you are and that you can afford repayments.
Although banks will vary on certain criteria’s such as your salary or credit history you some items are not negotiable. You will be requested to provide the bank with the following documents
· A Salary letter or Salary Certificate from your employer
· Salary slips you receive preferably going back over the last 6 months
· Six months consecutive history of bank statements
· Valid Passport copy and recent photos with valid residents visa
· A Copy of your Emirates ID
· Copy of current credit card statements and declaration of any outstanding debt.
· Details on the property you wish to buy its it new, off plan and the desired location.
Once you have your Expat Mortgage you are required to sign the memorandum of understanding
Once you have your Expat Mortgage in place you will need to agree final terms. Unlike other countries, especially in Europe once you have committed to a property if you pull out you are likely to lose a large chunk of money.
Once you have agreed on the purchase of a property you will be asked to sign an MoU (memorandum of understanding). This will detail the investments made, dates of completion and the finer details involved within the transaction.
As an expat you will have to deal with many specifics about the property that you may of never considered. It is important to be aware that once signed if you do not meet the agreed exchange date you will lose your initial deposit.