All You Need to Know About Interest Only Mortgage UAE

Interest-only mortgages offer many advantages to the borrowers and can be a better choice if you require to reduce your monthly expenses. The concept of interest-only mortgage UAE is still relatively new in the United Arab Emirates; hence the choices are quite limited. Although, with the lenders of the UAE becoming more competitive we can see this as a probable development sector. Here we mentioned a little guide related to interest-only mortgages and the facts why you consider one.

What Is an Interest Only Mortgage UAE

An interest-only mortgage is a home loan where you are needed to make payment of the outstanding interest on the loan for a specified time tenure. It means that when you create your monthly mortgage payments to the lenders, you are paying toward the outstanding interest on the loan, rather than the principal.

Interest-only mortgages can be structured in a variety of methods. Interest-only payments can be made for the mentioned duration of time. Given as a choice, or during the entire term of the loan. With certain lenders, specifically paying interest can be a provision that is available only to some borrowers.

How Does an Interest Only Mortgage UAE Work

Recently, there are a limited number of options for interest-only mortgage UAE and these are offered only by the lenders for a duration of time, usually no more than one year. At the end of this tenure, the mortgages return to normal repayment mortgages and your monthly payments would be adjusted taking into account the principal still outstanding. It means that they typically grow after an interest-only tenure.

Reason to Choose an Interest Only Mortgage UAE

Given that interest-only mortgage UAE is only permitted for a short-term tenure in the United Arab Emirates, the major reason to consider one is to reduce your monthly payments of mortgage for a set time frame. An interest-only mortgage is a better choice when you need certain experience or flexibility issues with cash flow.

For instance, if you only bought a new property and require to make repairs or purchase furniture, you may consider an interest-only mortgage for a time period. Lower monthly payments would permit you to be more flexible with your spending, while still completing your mortgage commitments.

As mortgage consultants, we are suggesting an interest-only mortgage choice to landlords who have currently brought a property and are seeking for a new tenant to rent a property. In the time between meeting the mortgage and locating the reliable and honest tenants for your property, an interest-only mortgage UAE can assist keep the expenses on your investment to a minimum.

Special Considerations for Interest Only Mortgage UAE

Certain interest-only mortgages can involve particular provisions that permit only interest to be paid in some circumstances. For instance, a borrower can be capable of making a payment just for the interest portion on their loan if the home suffers damage, and they are needed to make higher maintenance payments. In certain situations, the borrower can have to make a payment just interest for the whole duration of the loan, requiring them to handle accordingly for a one-time lump sum payment.

Advantages of an Interest Only Mortgage UAE

Interest-only mortgages reduce the monthly repayment required for the mortgage borrower by removing part of the principal from the payment. House buyers get the benefit of grown cash flow and more support for handling monthly outgoings. For first-time house purchasers, an interest-only mortgage UAE permits them also to defer larger payments to the future when they expect their income to be greater.

Although, paying only interest also means that the owner of the home is not creating any equity in the property – just the payment of the principal loan does so. In addition, when repayments begin to involve the principal, they become significantly higher. It can be an issue in case it coincides with a slowdown in someone’s finances – job loss, an unexpected medical emergency, and more.

Borrowers must estimate their expected future cash flow to make sure that they can complete larger monthly obligations, and pay off loans when needed. While interest-only mortgages can be convenient for a number of reasons, they can also add to default hazards.

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