Apartments, villas, and duplexes for sale in Dubai attract investors and end users from all over the world. It is no wonder that the prices of local real estate and the number of buyers who want to take out a mortgage loan continue to grow. Mortgages give many people the opportunity to become happy homeowners in a sunny emirate. However, not everyone who applies for a loan receives approval to get it.
There are many reasons why banks may reject a request for a mortgage loan. Therefore, every buyer planning to submit an application should familiarize himself with mortgages to avoid rejection or other unforeseen situations.
Lack of a stable work
One of the first things that banks pay attention to when a potential client applies for a mortgage loan is his employment history. Before approving a request, they want to make sure that he has a stable source of income. If a person works at his current workplace for a short period, or he has many gaps in his work experience, it is likely that the loan application will be rejected.
Low income
Banks want to know if a person will make monthly payments on a loan. If his income is too low, most likely, the mortgage application will be rejected.
Lack of a good credit history
One of the main reasons why a person can be denied a mortgage loan is a bad credit history. Banks always check the credit history of potential customers, and if it does not meet their standards, they reject the application.
Large credit load
Even if a potential borrower has a high and stable income, a good credit history, but many other loans, the bank may refuse a mortgage. When making a decision, the bank evaluates your overall financial situation, and if you have several additional loans, you will not have enough money to pay off your mortgage.
Also, the credit load will include guarantees on other people’s loans. And if the lender does not pay, and you do not fulfill your duties as a co-borrower, it will also negatively affect your credit history.
False information
The Bank carefully checks all the information received from the client. An attempt to cheat is likely to result in a refusal of a mortgage.
Even if you did it unintentionally, forgot something, missed something, or just made a mistake, the bank will most likely regard it as cheating and will not approve the application.
Refusal at the stage of real estate approval
In some cases, the bank may refuse a pre-approved loan at the stage of checking the property.
When you buy a property with a mortgage, it remains secured by the bank until the loan is repaid. Therefore, the bank must make sure that everything is in order with this property. This will protect you as a buyer.
To do this, the bank carefully checks all the necessary documents for real estate and checks the documents for the participants of the transaction more carefully. And only after that he decides whether he is ready to provide you with a loan for the purchase of this particular property.
If any serious problems are found during the inspection or the risk of loss of real estate for the buyer is too great, the bank will make a negative decision.
Applying for too much money
If a person asks for a large amount that is too high in relation to his income, the bank will most likely reject his application. In this case, the reason for the refusal is that the representatives of the credit institution will not be confident in the client’s ability to repay the mortgage.
Insufficient number of documents
When applying for a mortgage loan, the bank requires a set of documents from customers. If they do not provide the organization with all the necessary papers or these papers do not meet the nominal value, the request will most likely be rejected.
In Dubai, the following documents are required to apply for a mortgage:
• a copy of a foreign passport;
• a copy of the visa (if any);
• original and copy of the Emirati identity card;
• documents confirming the buyer’s solvency;
• documents confirming the legality of the methods of obtaining funds;
• real estate purchase and sale agreement;
• certificate of ownership (a title deed).
Debts in the tax and other authorities
Sometimes the reason for refusal of mortgage lending is debts to government organizations. It is important to check these debts to the tax inspectorate. Even minor fines and unpaid taxes or penalties can be the main reason for mortgage refusal. Also, if you have a criminal record, the bank has the right to refuse to issue a loan, but if the criminal record is conditional, some banks may meet customers halfway and issue a loan.
How do I find out the reason for the refusal?
In most cases, the bank does not directly give the reasons for the refusal of the loan. You can make an official request to the bank, but the credit institution has the right to hide the reason for the refusal.
If the reason is insignificant, the client has a chance to re-apply to the banking organization, employees always meet such clients halfway and disclose the reason so that the necessary adjustments are made in the future and the loan is approved.
Further actions in case of refusal
When eliminating all possible errors that caused a possible refusal of the bank, you can re-contact the organization with a package of documents. However, some time must pass before re-applying. Each credit institution sets the time interval independently. In most cases, customers have to wait from 1 to 3 months for re-contacting the banking organization. If the client applies earlier, the scoring system may “issue” a refusal, and it will not be possible to get a mortgage loan again.
Mortgage for foreigners – key requirements
According to Dubai law, foreign citizens have the right to purchase local housing with a mortgage. But in fact, it is not so easy to get it. Strict requirements are put forward to the borrower, including:
1. A resident visa.
2. Employment in one of the local companies or having your own company in the UAE.
3. A down payment of at least 25% plus all the costs of documenting real estate and legal support (this is another 6-7% of the cost).
4. Age from 21 to 65 years for employees and up to 70 years for self-employed persons.
5. It is desirable to have purchased property in the UAE.
Types of mortgages in Dubai
Both local and foreign banks operate in the UAE. Each of them has its own mortgage programs and offers for expats. The key difference is the method of interest accrual:
- Fixed rate. Your interest rate will not change during the term of the contract. This interest accrual scheme is used for lending for 1-5 years. If the borrower does not have time to pay the entire loan amount before the date, he will be charged interest at a floating rate.
- Variable. With such a lending scheme, the interest rates on the loan will be reviewed over a certain period (usually once a quarter), depending on the market situation and the refinancing rate of the Central Bank.
- Discount. This is a loan with a variable rate. The lender is given a percentage discount for a certain time. The discount applies only to the period in the contract, not to the entire loan term.
- Offset mortgage. This lending scheme allows you to link a loan to your account. Thanks to this, all funds that remain in your account are debited to the mortgage interest account. At the same time, the interest on the loan will be calculated on the difference between the balances on the credit and current (savings) account.
To buy real estate in Dubai, foreign investors can use both their own and credit funds. According to the legislation of the UAE, foreign citizens have the right to obtain a mortgage from local banks under the following conditions:
- the borrower must pay the initial payment. Its amount is set by the bank unilaterally;
- the client must have the status of a resident;
- be an employee or founder of one of the local companies;
- meet the minimum age and income criteria.
Credit conditions in different banks may differ markedly. Depending on the specific borrower and the desired building, the term (5-20 years) and the interest rate (floating or fixed) may vary markedly.
Help with buying real estate in Dubai
To get help in choosing a property based on personal preferences and opportunities, as well as support during the transaction, please contact the representatives of Emirates.Estate. The constantly updated aggregator catalog can offer you the most profitable and high-quality offers in the Dubai market. If you want to know more about the local laws and regulation in Dubai, you can find relevant information at dubai.lawyer.
