It’s your choice: four typical ways to take out a new mortgage

What is the best way to sign up for a home loan? Warren Philliskirk, the associate director of Mortgage International in Dubai, says borrowers typically choose one of four methods for securing home finance.

The UAE's property market is heating up, taking the nation's mortgage industry along for the ride. But what is the best way to sign up for a home loan? Warren Philliskirk, the associate director of Mortgage International in Dubai, says during his nine years in the UAE's mortgage industry, borrowers typically choose one of four methods for securing home finance. "There are no wrong or right ways, but there are many things to consider and pitfalls to avoid to ensure you get the absolutely best product for your needs." Here, he details the four routes that consumers use to secure a UAE mortgage:

1. They turn to their existing bank

This comes down to people’s working situations – they are busy and the daunting task of requesting bank statements and the time it takes to collect them puts them off shopping around. Taking out a mortgage is the largest financial decision a person can make, so it should be thoroughly reviewed and considered. Just avoiding increased paperwork will no doubt leave you with a product that puts you out of pocket or stuck with features not suited to what you really need. A 1.5 per cent difference in the interest rate over the term of a loan can ultimately leave you paying 25 per cent more. Banks are not impartial and are there to sell their own products. Do not make it easy for them and make sure you do the homework required so that you can at least be informed on what else is out there and challenge the salesman.

2. They turn to a friend or colleague’s mortgage provider

“John in IT got a great deal from BIG Bank so I’m going to do the same.” Again this is a big mistake as people rarely have the same requirements, and there are many factors to consider. Pricing is important, but so is the security of fixed rates, flexibility to make over-payments, assignment of external insurances and portability of the loan. These are just some of the features you must consider. Taking a reference from a trusted friend is always a good move that can save you time and ensure you get a good deal. However, people’s financial circumstances are very different, so ensure you can balance the good advice with sound facts on the market.

3. They research the market themselves online, approaching banks directly

This is a prudent choice but still comes with problems. While UAE lenders will discuss their products with you, they may not be clear on all of the credit and policy criteria. This can lead to wasted time and declined applications, or worse still, a customer ending up with an entirely different mortgage than they had planned. The final product a bank will offer is decided on many factors and this does not exclude valuations or individual developments. These can affect the loan to value but also the overall rate you pay. Banks may advertise rates as low as 2.99 per cent to draw customers in when in fact the parameters put in place to secure such rates generally only apply to 1 per cent of buyers. This will only be discovered after you have signed an MoU (contract to buy with the seller) which, once signed, cannot be reneged upon. If you are going to research products yourself, ask key questions: do rates differ between developments and does the final valuation have an impact on the rate? Is it mandatory to do a salary transfer? If I move to another country and want to lease my property what happens then? These are just some of the vital questions you must ask to guarantee a good deal.

4. They secure professional advice

This is the swiftest, most comprehensive way to find the right product and features to match your requirements. However, there are still areas of concern. Is your adviser the holder of any relevant mortgage qualifications? It’s not mandatory here in the UAE so, if not, what relevant experience do they have? To offer the best mortgage solutions, the adviser must conduct a full review of your current and future circumstances; this is a must or the adviser cannot possibly know what to offer. Tell them everything as they are there to represent you. And, again, ask questions: Does your adviser provide whole of market advice and are they contracted to all the banks making them fully impartial? What are their fees if at all and what’s provided in return for those fees? These differ greatly from fixed payments to percentages of the loan so you need to know what you are getting for the fee? Ask the adviser what, in addition to their guidance on products, they can offer in enhanced offerings from the lenders? In certain circumstances lower rates or improved features can be secured due to the working relationship of the consultancy and the banks on their panel.

Warren Philliskirk is the associate director of Mortgage International Business Dubai

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