From rates, restrictions, and valuations to turnaround time, here are the things you should ask your home finance advisor or broker when looking for home financing.
1. Loan offers
Know the complete home loan offer, says Srinivasan Padamanabhan, Business Manager, Mortgages at Mashreq Bank. “Ask whether the rates are variable or fixed? If fixed, for how many years? What is the expected step up rate? What are the processing charges? Do we need a life and property insurance? Why? Should you opt for pre-approval or straight final approval and which is the best option given the situation? How much time will it take for the approval and the final release of funds? Do you offer Islamic finance option? Is the offer different from the conventional loan? What are the after sales service options? Are loans available for non-residents?”
Check if there are any particular restrictions on the property that is to be financed, says Gil Azevedo, Head of Consumer Banking, Emirates Islamic. “Some banks have internal credit policies that restrict them from financing certain property types.”
3. Turnaround time
Always ask about the turnaround time for the property payments, Azevedo explains. “It will help buyers to manage time and finances, especially once a property has been identified that fits within the requirements. Sellers and brokers usually speak to multiple customers and proceed with the one that has finalised first. It is essential to inquire about the turnaround time early in the process, to avoid missing the property due to payment delays as it can be frustrating.”
4. Validity period
Understand the validity period of the pre-approval facility, says Azevedo. “This is important as the bank may ask for updated documents in case the validity period has elapsed before the property has been finalised.”
5. Profit rate benchmark
Verify with your home finance advisor the expected profit rate fluctuation and its benchmark, Azevedo advises. “Ideally, the profit rate should be linked to an independent benchmark rate, and the local standard followed is usually EIBOR (Emirates Interbank Offered Rate), which is published by UAE Central Bank. You should also look beyond the advertised rate and enquire about future rate changes, charges, and exit costs. Compiling a comprehensive list of charges will be ideal to aid in understanding the full cost of financing. Also, you should ask about any additional Takaful (insurance) required,” he adds.
6. Down payment
Know the down payment needed. “It is a result of the valuation and the corresponding regulation. For example, a property that is valued higher than Dh5 million requires a down payment of 35 per cent, Padamanabhan adds.
7. Expected valuation
Know the expected valuation. Padamanabhan explains “Depending on the expected value, the financing terms may be determined. There are Central Bank regulations that mandate the maximum amount that can be financed. Besides, the buyer may be able to determine the expected yield on the property if he decides to rent it.”
8. Broker details
Know about the agent you are dealing with. “Is the broker Rera approved? Is he using the standard document formats for drafting the property sale agreement? Will he be the custodian for the payment instruments? What exit clauses should be there to protect interests,” Padamanabhan adds.