Personal Loans Against Property

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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.

What could be some of the motivations behind taking a loan against property in the UAE?

People could prefer to go with a personal loan secured against a property because of the following reasons: 

  • In comparison to mortgaging the property altogether, the businessman could continue holding on to the property even after the loan has been availed.
  • An instant loan against property can be used for a variety of purposes for raising emergency funds, such as financing the education of the children, or their marriage, or for allocating resources towards business purposes and so on; . 
  • The interest rate for personal loan against property could be relatively low, since the property acts as a reliable form of leverage in the eyes of the financial institution.

What are the features of a loan against property in UAE?

  • A loan of up to 80% in the case of UAE nationals, and 75% in the case of expatriate applicants.
  • Repayment terms are extendable up to a maximum of 25% depending on the banks.
  • Salary transfer shall not be required.
  • Interest rates for property personal loan can either be variable or fixed.
  • Financing options can be given for properties on freehold or on lease, or they might also be given for villas with private title deeds.
  • In the case of UAE nationals, the minimum down payment that needs to be made is around 20% of the total value of the property. In the case of expatriates, the rate that is applicable is 25%.
  • For group insurance rates of up to 0.03% per month shall be applicable.
  • The profit rate shall begin at a variable of 3%. A reducing rate shall be used to measure the rate.

What questions do you need to ask yourself before applying for the loan?

  • Capability for loan repayment:

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.

  • Property valuation: 

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.

  • Tenure:

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.

  • Repayment capacity: 

The lender will evaluate the repayment capacity of the borrower by considering the income statements, ongoing loans and so on.

Eligibility

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.

Documents Required

In the case of salaried employees: 

  • A copy of your passport, Emirates ID and visa.
  • Bank statement
  • Proofs of alternative incomes
  • Sale and purchase agreements
  • All relevant documents related to the property
  • A copy of the relevant salary certificate

In the case of self employed individuals or private businessmen:

  • Copy of trade license of the individual
  • Bank statements for the past 12 months
  • Details regarding the company as well as personal liabilities
  • Memorandum of association with the amendments that are applicable
  • Details regarding company in addition to personal liabilities

Frequently Asked Questions

What is a loan to value ratio?

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. 

What kind of property can you use as collateral for taking a personal loan against property?

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.

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