Understanding Mortgages in Abu Dhabi
Are you feeling overwhelmed by the complexities of mortgages? Don’t let jargon like “Fixed term” or “Equated Monthly Instalment” deter you from achieving your dream home in Abu Dhabi. Let’s unravel the intricacies of mortgages together, empowering you to make informed decisions for your financial future.
Equated Monthly Instalment (EMI)
Your monthly mortgage payment, known as Equated Monthly Instalment (EMI), covers both the principal loan amount and accrued interest. Understanding your EMI is vital for effective financial planning and budgeting.
Re-Mortgage
Consider re-mortgaging as a strategic move to transfer your mortgage to a new lender. This can potentially offer better terms, rates, or financial benefits, aligning with your evolving needs.
Early Repayment Charges (ERC)
Early Repayment Charges (ERC) are fees imposed if you choose to settle your mortgage before the agreed term. Regulated by the UAE Central Bank, these charges typically range from 0-2% of the outstanding loan amount.
Why Choose Early Repayment?
- Regulated fees by the UAE Central Bank
- Flexibility to settle debts sooner
- Potential cost savings in the long run
Equity Release/Top-up/Additional Borrowing
As you repay your mortgage, you accumulate equity in your property. Leveraging this equity allows you to apply for additional borrowing, offering financial flexibility for various purposes.
Loan-to-Value (LTV)
The Loan-to-Value (LTV) ratio indicates the percentage of the property value that lenders are willing to finance. Governed by the UAE Central Bank, LTV ratios vary based on property category and borrower status.
Mortgage Rates Types
- Fixed Rate Mortgages: Stable interest rates throughout the loan term.
- Variable Rate Mortgages: Interest rates may fluctuate periodically.
Repayment Methods
- Repayment Mortgage Loans: Instalments cover both interest and capital repayment.
- Interest-Only Mortgage Loans: Payments cover interest only, with capital repayment deferred.
Insurance
- Loan Protection Insurance/Life Insurance: Safeguards against risks like sickness, disability, or death.
- Property/Buildings Insurance: Shields against damages caused by specified perils.
- Contents Insurance: Protects personal possessions within the insured premises.
Frequently Asked Questions
- What is Equity Release? Equity release enables accessing additional funds by leveraging accumulated property equity.
- How are Mortgage Rates Determined? Influenced by economic conditions, central bank policies, and lender-specific considerations.
- Why is Loan Protection Insurance Necessary? Essential for mitigating financial risks associated with mortgage liabilities.
