Buying your first home in the UAE? It requires careful consideration of various aspects. Among them, financial preparation creates the most stress – especially when you buy a home for the first time. This first-time homebuyer guide will explain how to be financially prepared.
How to be Financially Prepared to Buy Your First Home in UAE?
These essential steps will help you become financially prepared before buying your first home in UAE:
Determine Your Budget
The first step to begin financial planning for your home? Assess your financial situation. Do you need a mortgage to buy your first home? Usually, you require a stable monthly income of at least AED 10,000 to AED 15,000 to qualify. Calculate your debt-to-income ratio.
Your monthly debt payments should not exceed 40% to 50% of your monthly income, and that includes your prospective mortgage. It indicates to lenders that you can manage a home loan.
Save for a Down Payment
Want to buy homes priced under AED 5 million? Expatriates typically need a down payment of at least 20% of the property value in the UAE. And if the property is above AED 5 million, this increases to 30%. If you are a UAE national, you might be able to bring it down to 15%-20%.
Additionally, you should budget for extra costs such as a 2% agency fee, a 4% property transfer fee, and potential mortgage interest rates of around 3-4%.
Check Your Financial Health
Your credit score is essential to receive a mortgage. Keep it high. It improves your chances of getting better mortgage terms and lower interest rates. Also, get a copy of your credit report before applying. Identify and resolve any inaccuracies.
Understand Mortgage Options
You have two options – either a fixed-rate mortgage or an adjustable-rate mortgage (ARM). A fixed rate offers you a constant interest rate. An adjustable rate gives a fluctuating interest rate. Fixed-rate mortgages provide you stability.
ARMs may offer lower initial rates. But, it carries the risk of future rate increases. Mortgages are usually 15 to 30 years long in the UAE. So, consider how long you plan to stay in the property when selecting the term length.
Factor in Additional Costs
Be prepared for additional expenses like registration fees, legal fees, moving costs, and community fees. Do you want to go with a popular freehold area? Then you should also factor in the higher costs related to prime locations.
Conclusion
This first-time homebuyer guide comes in handy for you to be ready financially to own your first home. Moreover, you can get pre-approval when you plan for the mortgage. It helps establish your borrowing capacity and tells sellers that you are a serious buyer. Start the planning much in advance, and you’ll find how smooth your home-owning journey becomes!
