The central bank advised bank customers who want to take real estate financing to buy a new home or investment property to ask 20 essential questions regarding the term of repayment, the interest rate, fees, delay fines and other matters.
Al-Markazi explained, in the details of an awareness bulletin that the Emirates today obtained a copy of, that the mortgage is a type of loan that is usually used to finance the purchase of a property, such as a new house or an investment property.
He said: "When a customer thinks about buying a property and needs to obtain a loan to cover its price, he should search in multiple places and compare the interest rates offered. While the banks will consider several factors such as the quality of the property, the amount of the down payment, the credit rating, etc."
The Central added: “The customer must try to liquidate the offers of financial institutions to the lowest possible number, then prepare to discuss the real estate loan with them, and prepare answers to their questions about the property such as your income, expenses, assets, debts, and the amount of the advance payment of the property’s price, and the financial institution will register a claim On the property until the loan is paid off. "
He stressed that the client has the right to ask his fundamental inquiries to ensure that he knows his main obligations before signing and the most important of them are:
- The period of the mortgage loan amortization, meaning how many years it will take to pay off the loan.
The term of the loan is the period of time during which the bank will provide the loan. The mortgage agreement usually ends after a period of time (for example, from 1 to 5 years), after which the customer may request to renew the loan for the duration of his balance, repayment or transfer it to another financial institution.
He pointed out that the customer has the right to ask about the annual interest rate:
- Does the interest rate change, and if so, when does it change.
- How much is the principal amount and how much interest will be paid at the end of the loan term
- How much is the fine for early payment of the mortgage
- What is the value of the mortgage fees and the
Central added, it is also important for the customer to know all the details related to fees and expenses such as: -
Fees Legal
- Valuation
Fees
- Administrative Fees - Examination Fees - Registration of the
mortgage -
Fee for late payment
- Fee for failure to pay - Fees for
changing the due date of the payment
- Fee for changing the amount of the payment
- Fee for adding a
flat payment - Mortgage renewal fees
- Knowing any other fees
The Central Bank added that after comparing interest rates, fees and expenses, and the customer’s approval of the mortgage loan, he will also receive a multi-component agreement. He should ask his lawyer to review it before signing, as it is a legally binding document once signed and it is necessary to understand what he approves.
He stressed that if the customer is looking for a mortgage for a rental property as an investment, he must ensure that the rental income will exceed its costs, including the cost of borrowing, any service charges on the property, and the possibility that it will take time to rent the property.