This article was originally posted in the summer of 2020, just as the lockdown ended.
Due to the problems in the market due to COVID-19, we have seen the UAE Central Bank implement a number of policies as part of their stimulus package in order to assist property buyers in the UAE.
These changes mean that taking a home loan out in the UAE has not been this cost-effective for the past 5 years.
Loan-to-value increases for first-time buyers
- In March 2020, there were stimulus measures implemented by the UAECB that allowed banks in the UAE to increase the loan-to-value (LTV) for first-time buyers by 5% for both expats and UAE nationals.
- These changes now allow expats to borrow up to 80% of their first property purchase price, and UAE nationals up to 85%.
- This increase in LTV allows buyers to enter the market with a lower amount of funds required for their purchase. An additional 5% on the purchase of a villa for AED3 million is AED150,000. This makes a huge difference for the end user.
- There are a handful of lenders that will also include assistance with fees on top of their lending. This additional borrowing goes towards paying some of the fees associated with the purchase and can contribute up to an additional 4.5-5%, again lowering the amount of funds needed for the purchase.
Reducing interest rates
- From late 2019, the US Federal Reserve (US Fed) has reduced its interest rates dramatically, and they are now at record lows. The UAE dirham is linked to the US dollar, and therefore we have seen interest rates in the UAE drop over the past few months.
- These rate reductions in the US and the subsequent drops in the UAE mean that interest rates for borrowing are at their lowest ever. It is a great time to take advantage of this, whether you are looking to buy a property or looking to switch your current loan to a cheaper deal to save money.
- Why not consider switching your loan to a 3-5-year fixed deal now to lock in these historically low rates for the next few years? You can save money and secure your payments by doing this.
Get an online quote today and discuss your savings with our mortgage experts.
Zero bank processing fees
- As part of the stimulus package and to capture more business, several banks have introduced lending offers with zero bank processing fees in order to make the cost of setup lower.
- Not all lenders have opted for this, with some reducing their fees to 0.5% or lower but still charging a fee. Any reduction in these times helps, and we have seen these reductions really entice our customers.
Payment Holidays Post-COVID
- Due to the hardships that we have experienced as a result of COVID, the UAE Central Bank brought in payment holidays on loans as part of their stimulus package.
- This meant that the borrowers could take advantage of a three-month payment break on their existing home loan. The banks are very receptive to this, and we have assisted a lot of customers with delaying their payments.
- The interest on these missed payments will be incorporated into the remainder of the loan over the remaining term.
Holo has been featured in the UAE press, discussing how we have assisted clients with arranging their payment holidays.
This solution has helped a large number of home owners delay their mortgage payments and become a little more financially stable in these times.
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.