In the dynamic landscape of personal finance in the UAE, leveraging equity and exploring equity release options can provide significant opportunities for individuals looking to enhance their financial flexibility and unlock liquidity from their property assets.
What is Equity?
Equity refers to the portion of the property’s value that you truly own, minus any outstanding mortgages or debts against it. To calculate this, minus the outstanding mortgage balance from the current market value of your home.
For example, if your property is valued at AED 1 million and you have an outstanding mortgage of AED 600,000, your equity in the property would be AED 400,000 (1000000 – 600,000 = 400,000).
In a thriving market like the UAE, where property values have shown robust growth over the years, accumulated equity can become a substantial asset. This accumulated equity can be strategically utilized to finance a range of pursuits, such as investments, educational costs, home enhancements, and even preparations for retirement.
Understanding Equity Release
Equity release is a financial strategy that enables homeowners to access the value tied up in their property without needing to sell it outright. Equity release percentages depend on factors such as property type and ownership status. Typically, UAE nationals can access up to 85% of their property’s value, while expat residents can typically borrow up to 80% of the property’s appraised value.
Benefits
Utilizing equity and exploring equity release options in the UAE offers several advantages:
–Access to Capital: Equity release provides homeowners with access to significant sums of money, enabling them to fund large expenses or investments such as financing a new property or renovating an existing property.
– Financial Flexibility: Whether through loans, equity release schemes, or sale and leaseback arrangements, individuals can choose the method that best suits their financial needs and goals. This option is beneficial if you need to raise funds for the initial payment on a second or subsequent property, where the down payment required is considerably higher compared to your first property purchase.
– Preservation of Ownership: Homeowners retain ownership of their property while utilizing its financial value.
However, it’s crucial to consider the following factors before opting for equity release mortgage:
– Costs and Fees: Understand the associated costs, including interest rates, arrangement fees, valuation fees and potential penalties for early repayment. Interest rates on equity release loans can be fixed or variable. Fixed rates may range from 3% to 5% per annum, while variable rates could be tied to a benchmark rate like EIBOR (Emirates Interbank Offered Rate) plus a margin.
– Financial Planning: Evaluate the impact of equity release on your overall financial plan, including potential implications for inheritance and retirement.
Documents Required for Equity Release Loans in Dubai-UAE
The following documentation must be provided to lenders by anyone in Dubai who wishes to use equity release options:
. Title deed
. Building plan
. Registration documents
. Approval documents from relevant authorities
As an expat, you will also need to present:
. A copy of your passport
. A valid residence visa
If you are an employed individual, you may also need:
. A salary certificate
. Your latest pay slips
. Your bank statements for the last six months
Self-employed individuals could require:
. A copy of your valid trade license
. A Memorandum of Association
. Your bank statements for the last six months
. A financial audit going back at least two years
How Capital Zone can help
We are the best mortgage brokers in the UAE, offering comprehensive solutions for all your mortgage needs. With years of experience and expertise in the industry, we are equipped to help you navigate the complex process of securing a mortgage. Whether you’re looking to buy your first home, invest in real estate, or refinance your existing mortgage, our team of professionals is here to assist you every step of the way.
Contact us today to learn more about how we can help you find the right mortgage solution that fits your individual needs and financial goals.
