What is Home Loan
A home loan is also recognized as the mortgage, is an amount of money borrowed by a person, basically from banks and companies that lend money. The borrower has to return the loan amount with interest in easy monthly installments or EMI’s over time that can depend on the nature of the loan.
Dubai is one of the amazing city is all over the UAE, most of the people want to reside in this vibrant city. Now with the help of home loan you can easily buy a house in Dubai. Home loan in Dubai is something that potential home owners search for quite a bit when they plan on buying apartments or villas in Dubai. When exapts make Dubai their home, they want to buy a property that suits their taste and fits within their financial means.
There are various types of home loan choices that are made to suit each unique condition. You can take home loans to buy homes that are either business or personal. When you take out a home loan, the bank or financial institutions allows the property you are buying as security. This signifies that it holds the legitimate right to the home in the case of non-payment.
How to apply for home loan in Dubai
The process for applying for a home loan in Dubai is as follows:
- The first step is, you need to check that how much money you required to purchase a home in Dubai.
- Then along with fixing the rate of interest comes the term of the home loan Dubai, going for a variable, or having the fixed rate of interest.
- The most important thing is your need to prepare all the necessary documents required for getting a home loan in Dubai.
- The process of obtaining a home loan often takes a few weeks. Thus, people selecting the same have to obtain advance approval from the banks.
These are some of the important considerations that you are required to examine to get a home loan in Dubai.
Documents Required for Home Loan in Dubai
If you are a salaried individual
- Application form, authorization letter for bureau check, and consent letter.
- Valid passport or National ID, Emirates ID, and residence visa.
- Original three months bank statement for new clients.
- Salary certificate.
In case you are self-employed
- Application form, consent letter for bureau check, and authorization letter for lending.
- Trade License copy, Chamber of Commerce Registration, Memorandum of Association.
- Original twelve months company and personal bank statements for new clients.
Eligibility Criteria for Applying Home Loan in Dubai
- Aged between 21 to 70 years (at loan maturity)
- Minimum monthly income of AED 12,000 to AED 20,000.
- Minimum length of service of six months (if you a salaried individual), and the minimum length of three years in business (if you are self-employed).
Tips to Consider While Buying a house on Home loan in Dubai
Currently, the home loan rate of interest provided by banks and other lending institutions are below several years. Anyone can get a home loan in Dubai at the rate of interest of around 7 percent, with a good credit profile. But, before you take a home loan, some important things should be noted. The loan amount that you get will be based on various factors, such as your current salary income, etc. in addition, you require to get a fix on other things including the amount of the house that you are considered to buy.
Here are a few tips to help you while buying a house on a home loan in Dubai, but these can vary based on the circumstances and requirements of an individual.
1. What should be the price of a house
The amount of the house that you want to buy on a home loan should not exceed 5 times your annual income. By doing this, you would be able to serve EMI comfortably without increasing your household budget.
2. The 35/50 rule
When taking a home loan in Dubai, the lender would ask you regarding your current liabilities like a car loan or personal loan EMI. Banks usually do not pay an amount, at which the EMI will be more than 40 to 50 percent of your monthly take-home pay.
It is good to take a loan where the EMI of home loan does not exceed 35 percent of your monthly income, while the total EMI like car loan etc. should be limited to 50 percent. In case there is no other loan, you can go up to 50 percent with a home loan. This would also provide you the opportunity to save for long-term goals. You can also add the income of your spouse to increase the eligibility for a home loan Dubai.
3. Credit Score
Some banks provide a lower rate of interest on home loans to borrowers who have a higher credit score. Your credit profile helps to get a good home loan deal with banks. A credit score of 750 and above is considered a better credit score by many banks and other lenders
4. Opt for a shorter duration
The EMI per lakh, for a similar amount of loan, is less for a long period and more for a short period. But, the cost of interest or interest burden is just the opposite. If you have a longer period to keep EMI down, the overall interest burden will be higher. To keep interest costs low, opt for a shorter loan term.
Don’t Forget to do your Calculations
Not for home loans, making calculations and knowing your estimated EMI is essential for any kind of loan, whether it is a personal or car loan. This is because calculating not only help you analyze your power, but also helps you to plan your finance. The use of an online EMI calculator is most efficient ways to perform this.