The Debt Panel: 'I am struggling to pay for an $816,000 off-plan property'

The Sharjah resident has no discretionary income or savings after monthly expenses are deducted from his salary

While home finance seems to be an attractive option for purchasing a property, it’s common for a borrower to hit a roadblock in paying off the mortgage debt. Illustration: Deepak Fernandez / Getty Images
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I bought a property worth Dh3 million ($816,882) in Dubai this year. Because it is an off-plan property, I will only be eligible for a mortgage once it is ready for handover in 2026.

My wife and I pay about Dh13,000 a month for the property as per the developer’s payment plan. However, this huge financial outlay, combined with the Dh60,000 yearly rent for the property we currently reside, in is taking a big chunk out of our monthly income.

I have a monthly wage of Dh22,000 and we are living from one salary to the next. After paying for our children’s school fees, car loans, fuel costs, maid’s salary, credit card bills and miscellaneous living expenses, we are left with no savings.

I am worried that I won't be eligible for a mortgage once the property is handed over as I have a history of missing credit card payments. Will banks deny issuing me a mortgage because of this credit history? I have been diligent in making payments for the past few years. Please advise. RM, Sharjah

Debt panellist 1: Jaya Ratnani, managing partner at Freed Financial Services

Buying a home is a dream come true for most of us. While home finance seems to be an attractive option to receive financial support for purchasing a property, it is common for a borrower to hit a roadblock in paying off mortgage debt.

Therefore, budgeting is the essence of financial planning, not only for long-term objectives but also for short-term goals.

When buying a property, most people equate rental expenses with the monthly loan payment and end up falling into a mortgage debt trap.

In addition to the 25 per cent down payment, you are required to pay 4 per cent to cover title deed registration and mortgage registration fees.

Owning a house also comes with the payment of community service charges, maintenance expenses and chiller charges. This needs to be adequately budgeted in the monthly expenses when moving into a self-owned property.

If it is a rental property, the landlord takes care of service charges and maintenance issues.

Many people are also attracted to aggressive discounts offered on under-construction properties. However, it may take anywhere up to three years to take possession of such properties.

This puts dual pressure on homebuyers as they must pay rent while meeting developers’ payment plans, which is what has happened in your case.

Firstly, you will need to conduct a financial health check and calculate your income versus expense ratio. You will need to re-evaluate your borrowings and the repayment schedule.

Try to cancel your credit cards and consolidate your debt into one single, sizeable debt. This can be done by taking a personal loan at a lower interest rate.

Taking action now will help you to make regular payments and possibly settle your existing liability before availing a mortgage in 2026. It is also important to keep your total debt repayments below 50 per cent of your income.

If your current financial situation does not allow you do this, you could consider selling the property to recover the amount you have paid and the buyer can take over the remainder of the developer’s payment plan.

This could wipe out the off-plan property debt and reduce your monthly cash outflow, in turn enabling you to enjoy the present time with your family.

Try to cancel your credit cards and consolidate your debt into one single debt. This can be done by taking a personal loan at a lower interest rate
Jaya Ratnani, managing partner at Freed Financial Services

Alternately, you can also seek help from debt management experts who can assess your financial situation and negotiate with banks for consolidation of your debt or restructuring of your liabilities.

Debt panellist 2: R Sivaram, executive vice president and head of retail banking products at Emirates NBD

Many people, homeowners and investors alike, view buying off-plan as a good way to purchase a new property. However, as it goes with any investment, there are advantages and disadvantages to consider when buying off-plan.

Given the 2026 handover you mentioned, I am sure you had a clear idea of the financial outflow of your household income when you decided to buy the off-plan property.

While the benefits of the off-plan property are attractive, it is important not to financially overburden yourself — this, in itself, becomes the biggest risk when buying a property in these conditions.

In your case, I would recommend that you immediately take stock of your current financial situation and the choices you are making regarding your lifestyle.

It is important to work on a budgeting plan and set aside a monthly limit on your discretionary spending outside of basic essentials such as groceries, utilities and school fees, especially given you are servicing the property in addition to your rent commitments.

You should rework your monthly expense budget by looking at the nature of the expenses and their importance, given that your first priority would be to not delay the payments towards the off-plan property.

For example, you could look at reducing your monthly burden towards renting by moving to a different home that has a lower rent.

The more efficient your household budgeting is until the property can be mortgaged, the better off you will be.

You will also need to ensure that credit card and other loan payments are timely — a good credit history will ensure you do not have challenges with the banks when you apply for a mortgage.

Try to foster a habit of putting a percentage of your earnings aside as savings to help you on a “rainy day”.

It may not be easy to suddenly change your financial habits overnight, but working with your spouse in the coming months will help your situation.

Debt panellist 3: Alison Soltani, founder of Leap Savvy Savers

In terms of the property, you are usually required to pay between 20 per cent and 80 per cent of the total value before the construction work is completed.

That means you will have a substantial percentage of equity in the property. Generally, the lower the loan to value of the mortgage, the better chance you have of a successful application as you are a lower risk for the lender.

However, simply having equity in the property does not automatically secure a mortgage.

As well as income, lenders will also assess your credit score. You can easily check your credit report on the Al Etihad Credit Bureau’s website.

Dubai apartment prices August 2022 — in pictures

A good score is generally between 680 and 730 and will increase your eligibility for loans and mortgages.

You have time to increase your score by paying all your bills on time, not using all your available credit and not making too many credit applications in a short time frame.

To address your current situation, you need to evaluate your outgoings and make decisions about what you value spending money on.

You have two levers to pull — decrease expenses or increase income.

First, write down all your expenses for the past couple of months and honestly assess them for their worth.

For example, you could trade your car in for an older model and decrease the car loan. You could move into a smaller house to reduce rent. Decide which expenses you can cut while maintaining a life that you are happy with.

If you carry a balance on your credit cards, that should be one of the first things you eliminate as they carry high interest rates.

Work out a plan for reducing expenses in other areas, while you pay off high-interest debt. This will also increase your credit score.

The next thing to do is to plan ahead. For large expenses such as school fees and rent, create sinking funds. Start putting aside money each month so that when it is time to pay a large bill, it doesn’t derail your lifestyle for that pay cycle.

Also, you could increase your household income. Perhaps you can train for a promotion or apply for different jobs. You might find that you have a marketable skill that you can turn into a side hustle. Increasing your income will also boost your chances of securing a mortgage.

Finally, ensure you have a crisis plan ready if rising costs put you in an unsustainable financial position.

Check the property contract. You may be able to sell it if your situation becomes unmanageable or if the building work becomes delayed. While not ideal, financial security must be the priority.

The Debt Panel is a weekly column to help readers tackle their debts more effectively. If you have a question for the panel, write to

Updated: August 24, 2022, 5:00 AM