Your affordability and existing liabilities will all be taken into consideration when applying for a mortgage in the UAE. If you have credit card debt, a personal loan, or a business loan that you are currently paying off, lenders will take the outstanding balance into account.
When you submit your mortgage applications, banks will perform a credit check. Before you apply it is a good idea to check your credit score and obtain a credit report. You can do this online with the AECB (Al Etihad Credit Bureau).
You do not need a perfect credit score but you will likely benefit from more preferential mortgage interest rates if you are perceived to be a reliable borrower with a higher score. The credit report and affordability check will detail the current credit that you are using or have access to including your credit cards, personal loans, and business loans. The report will also detail any late payments on utility and telecom bills.
As well as your affordability, the lender will also apply a stress test. The stress test takes your current income and liabilities in the case that interest rates rise to understand if circumstances changed you would still be able to afford your monthly mortgage repayment.
Let's take a look at how any other borrowing will impact your UAE mortgage application and what you can do about it.
Credit card debt
If you're thinking about applying for a mortgage in the UAE then it's a good idea to limit spending on your credit card and reduce your balance.
Credit cards have higher interest rates than loans and the debt could multiply quickly. Prioritize paying off the balance, and make larger payments than the minimum monthly amount.
If you have an outstanding personal loan, lenders will take into account whether you have made the monthly repayments on time, and how much longer you have left on your loan term. Your monthly repayment will be taken into consideration as part of the affordability check and stress test on your application for a mortgage. It's a good idea to speak to the lender your loan is with to see if you can pay down a bit more without incurring an early repayment penalty.
If you are self-employed and you have taken out a business loan in your company's name, then the lender will not take your company's liabilities into consideration when assessing personal affordability. While lenders will not consider your business loan repayments as part of your affordability check, you should be mindful of them when you are thinking about how much you can borrow.
To understand how much you can borrow, use an online mortgage calculator. If you want to understand which banks you could apply for a mortgage with as a self-employed individual, our online application tool will capture all your requirements in less than two minutes and search the market for you.
If you are self-employed, have a business loan, and want to apply for a mortgage in your company's name it is a good idea to speak to a mortgage consultant to understand your needs in more detail. There are additional requirements for companies wishing to arrange a mortgage and they will be assessed on a case-by-case basis.
Remember that when you consider a home loan application, your affordability and credit play a part in whether you will be accepted. Taking some time to get your financial affairs in order may mean you start the process a bit later, but it will increase your chances of being accepted.
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This blog is for educational purposes, but everyone's case is unique, and local guidelines and regulations may change. Our mortgage advisors can help you with any question you may have and have the latest advice. Get in touch.