What is Loan against Property?
A loan against property involves using your property as collateral to obtain financing. Typically, you can borrow up to 120% of your property’s value, though this may vary based on the lender and your individual situation.
One of the primary benefits of securing a loan against property in the UAE is the easier approval process compared to other loan types, like unsecured personal loans. Since this loan is backed by an asset, lenders face less risk if you fail to repay the loan.
Why Do People Prefer a Loan Against Property in the UAE?
There are several reasons why individuals in the UAE opt for a loan against property, home loan and mortgage loan. Some of the most common reasons include:
Debt Consolidation:
If you have various debts with differing interest rates, a loan against property can help you consolidate them into a single monthly payment. This approach can potentially save you money on interest and simplify your financial management.
Financing Major Purchases:
For significant expenses, such as buying a car or funding a wedding, a loan against property can be an excellent solution. It allows you to spread the cost over a more extended period, making it more manageable.
Investment Opportunities:
If you’re considering purchasing an investment property, using a loan against personal property can be advantageous. You can leverage the equity in your current home to finance this new investment.
Business Expansion:
Entrepreneurs seeking additional funds for their businesses often turn to loans against property, as they typically offer lower interest rates and longer repayment terms compared to other loan types.
Funding Education:
Investing in your child’s education is crucial, and a loan against property can provide the necessary funds without straining your finances.
Advantages
Low Interest Rates
A significant benefit of obtaining a loan against property is the ability to access lower interest rates in the UAE. Since the loan is secured by an asset, lenders face reduced risk in the event of default, allowing them to offer more favorable rates.
The current rate for UAE Nationals is 3% + 3 Month EIBOR offered by Mashreq Bank
Longer Repayment Period
Another benefit of taking a loan against property in the UAE is the ability to extend the repayment period. This allows you to distribute the repayment costs over a longer timeframe, making your monthly payments more manageable and helping you to better handle your finances.
Easy to Obtain
Typically, a loan against property is simpler to obtain compared to other mortgage options. Since the loan is secured by an asset, lenders face less risk, making it more likely that you will be approved for this type of loan than for an unsecured personal loan.
Features of Loans Against Property (LAP) for UAE Nationals
Loans against property for UAE nationals come with various features that make them appealing to borrowers, including
· Minimal Documentation
· High Loan-to-Value Ratio: You can borrow up to 80% of your property’s value.
· Easy Approval Process: These loans are generally easier to secure. You can get an approval in 24 hours, depending on which lenders you use.
· Reduced EMIs
· Flexible Repayment Options
· Monthly Payments
· Extended Repayment Period
· Favorable Repayment Terms
· Property Insurance
· Simple Application Form
· No Prepayment Charges
· Attractive Interest Rates
· Lower Mortgage Rates
Documents Required for a Loan Against Property for UAE Nationals
The specific documents needed to secure a loan against property may differ by lender, but some common requirements include:
· Passport
· Emirates ID
· Salary Certificate (for Salaried Individuals)
· If self-employed – Company Documents such as Trade Licence, MOA, etc
· Property Title Deeds
· Proof of Income
· Proof of Address
· Bank Statements from the last 6 months
Additionally, you will need to accept the loan agreement’s terms and conditions and cover any processing fees and other charges.
