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In case you apply for a loan against an estate, the property can be used as a form of collateral in order to assure the bank of your repayment capacity. The loan provider shall assess the value of your home in order to determine the amount of loan that you are eligible for. The loan shall be given for a certain proportion vis-a-vis the market value of the home. The percentage amount is variable depending on the bank that the client is taking the loan from. In case the person does not pay back the loan, the lender has the right to sell it off at auction. Consequently, it is important to evaluate the lender and their track record before the negotiation.
People could prefer to go with a personal loan secured against a property because of the following reasons:
The applicant should be confident about their income structure before making the decision about taking a loan against personal property. The loan repayment can be made over an extended period of up to 20 years, but this period would vary from institution to institution.
The loan against the property shall be provided only against the collateral, such as a constructed or a commercial property. Before deciding on the eligibility for loan, the lender shall make an appraisal of the property.
Loan taken against a property comes with a longer tenure period than that of a personal loan. You need to consider the manner of repayment along with the EMIs.
The lender will evaluate the repayment capacity of the borrower by considering the income statements, ongoing loans and so on.
Down payment: In the case of UAE nationals, the minimum down payment that needs to be given shall be 20% of the cumulative property value, while in the case of expats it is 25%.
Salary requirement: In case the person is a UAE national, their earning capacity should be at a minimum of AED 10,000 per month. In the case of expatriate employees, at least AED 12000 should be the income.
In the case of salaried employees:
In the case of self employed individuals or private businessmen:
Ans. The Loan to value ratio is the ratio between the value of the property and the sum that is being borrowed from the financial institution.
Ans: If the application is for a loan against property, the rule is that it must be your own house. In case the individual owns a piece of land, it might also be acceptable to the lenders. The important point here is that a property must be used which is free from any pre-existing debt obligations.