I have a rather large mortgage on a villa in Arabian Ranches, but I have recently had a pay rise and am now thinking of making overpayments on my mortgage each month. I think this is a good idea but I am unsure whether this will bring down my payments over time. I do not have a great deal of money left over each month so I am nervous about doing something that might not be to my financial advantage. What would you advise? RP, Dubai
In the majority of cases reducing the outstanding balance on a mortgage is a good use of cash, although it is always wise to check that this will give you the best return on your money as overpaying effectively gives a net return on the cash used to overpay at the mortgage rate. With the current very low rates of interest on deposit accounts just about everyone will be better off reducing their mortgages, provided they have set aside a cash fund in the event of emergencies. Only if a mortgage interest rate is lower than a deposit account rate would you be better off keeping the money in cash. Reducing the outstanding balance means that over time more of what is paid each month goes towards repaying the capital, the mortgage is repaid sooner and the total amount of interest payable can be significantly reduced. Before making overpayments, you must check whether your lender has any penalties for doing this. Most will have an early redemption penalty, but many will allow a certain amount of overpayment or capital redemption each year, typically 10 per cent of the outstanding balance. This should be shown in the mortgage terms and I recommend that you obtain confirmation in writing before making any changes.
I am planning to import onions in Dubai. I am an Indian national, currently holding a tourist visa and I want guidance regarding setting up with a business visa as I want to do this the proper way. What would be the easiest procedure to apply for the right visa? MB, Dubai
To import goods into the UAE, you have to set up a legitimate company with an appropriate trade licence. The main options are to set up a company in one of the various free zones, provided one permits your type of business so that you have 100 per cent shareholding, or to set up a limited liability company (LLC), which is also a popular option and may have fewer restrictions on how business is transacted. While it is often cheapest and easiest to set up a company via one of the various free zones, this is not always an option for a business that intends to import items, so you may need to go into partnership with a local sponsor by way of an LLC. This person would technically own 51 per cent of the company, but the right local sponsor can be an asset. Once the company has been set up it is possible to apply for a residency visa so that you can work legally. You will require business premises, which must be legally separate from your home, and may have to prove that you have sufficient funds. The issue is complex and not one that I am able to cover in any great detail in this column. I suggest that you start by seeking advice from the Dubai Chamber of Commerce (www.dubaichamber.com) as it will be able to provide you with details of the options and of the fees, which will be significant. The website of the Department of Economic Development also has useful information.
I read your recent article in The National regarding knowing tenants' rights that related to Dubai, for instance where for some reason that tenant had to end a lease within the term and expected to have part of the lease recompensed. I have just relocated to Abu Dhabi and am close to signing an annual lease agreement for Saadiyat Island, so I am curious if the same arrangement of recouping part of the lease payment exists if for some unforeseen circumstances we had to leave Abu Dhabi early? GE, Abu Dhabi
At the present time Abu Dhabi does not have an equivalent to Rera (the Real Estate Regulatory Authority) that operates in Dubai and offers clear guidance and protection to both landlords and tenants, although I understand that such a body has been proposed and is expected to come into effect before too long. Standard contract terms do not permit a tenant to break an agreement early, but it can be possible to negotiate a "break clause" if all parties agree. Usually the tenant would be required to give two or three months' notice and must pay the rent in full for that period. It would be unusual for a break clause to be added in cases where the rent is payable annually in advance. The landlord is under no obligation to refund any of the rent payable if a tenant breaks a contract, no matter the circumstances, although there are always cases of an amenable landlord when the tenant helps to find a replacement at an equivalent or higher price, so that the landlord does not lose out financially.
Keren Bobker is an independent financial adviser with Holborn Assets in Dubai. Contact her at email@example.com