Mortgages

How to shop for a mortgage in Abu Dhabi
With dozens of competing banks in Abu Dhabi to choose from, you could think that today’s mortgage market is very confusing in Abu Dhabi. It really is not though if you know the basic facts about financing a property purchase in Abu Dhabi. The following questions and answers should assist you, if you are interested in buying a property in Abu Dhabi and taking a mortgage from a local bank in Abu Dhabi.

How much can my mortgage be in Abu Dhabi?
In general it depends on your monthly income and the cost of your new real estate property in Abu Dhabi. Banks and financial institutions in Abu Dhabi use certain guidelines to determine the mortgage amount that they will lend to most homebuyers. The main guidelines used are housing expenses and long term debt for the property in Abu Dhabi. Local banks in Abu Dhabi generally say that housing expenses (including mortgage payments, property insurance, income taxes and special assessments) should not exceed 24 % to 32% of your monthly income.

Conventional Mortgage Loans in Abu Dhabi
Housing Expenses in Abu Dhabi should be around 24% - 32% of your monthly income.
Housing Expenses + your Long-Term Debt in Abu Dhabi = 33% - 39% of your monthly income.

Banks in Abu Dhabi usually define long-term debt as monthly expenses extending more than 12-24 month into the future. These expenses should not exceed 33 % to 39% of the homeowner’s gross monthly income in Abu Dhabi.

What types of mortgage loans are available in Abu Dhabi?
Although you may see many different types of mortgages advertised in Abu Dhabi, they all belong to just two type of mortgages: mortgages that carry a fixed interest rate, and mortgages that change interest rate during the course of the mortgage-loan on a periodic schedule mutually agreed by you and your your bank in Abu Dhabi.

Fixed Rate Mortgages in Abu Dhabi
You may are familiar with a fixed-rate mortgage. The major advantage of a fixed rate mortgage is that you know exactly your housing cost for the lifetime of the mortgage loan in Abu Dhabi. Some fixed-rate mortgages are as following:

* 30-year fixed-rate mortgages
* 15-year fixed-rate mortgages
* Bi-weekly mortgages
* Convertible mortgages

The 30-year fixed-rate mortgage with banks in Abu Dhabi may still be the best mortgage for your circumstances. It offers the lowest monthly payments of fixed-rate loans in Abu Dhabi, and your monthly payment schedule will never change. Some banks in Abu Dhabi offer 10, 25, 20year term mortgages as well. But please remember, the longer the term of the mortgage loan, the more total interest you will pay over the years to the banks in Abu Dhabi.

The 15-year fixed-rate mortgage allows homeowners to own their homes free and clear in half the time and for less than half the total interest costs of the traditional 30-year loan. The loan’s term is shortened by the 10 % to 15 % higher monthly payments. Some homebuyers in Abu Dhabi prefer this mortgage because it allows them to own their home before their children start college. Others prefer it because they will own their home before retirement.

The major disadvantages of the 15-year fixed-rate mortgage in Abu Dhabi are the higher monthly payments. But if saving on total interest costs and cutting the time before you fully own the Abu Dhabi property, the 15-year fixed-rate mortgage is a good option.

Convertible Adjustable Rate Mortgages (ARMs) in Abu Dhabi are another new loan product in the Singapore real-estate market. It worked like any other ARM, but it offers homeowners a distinct advantage as it allows them to turn their ARM into a fixed-rate mortgage after a set period (usually during the second through fifth years of the loan).

Adjustable Rate Mortgages in Abu Dhabi
Adjustable Rate Mortgages (ARMs) have become on of the most popular and effective tools for helping some prospective homebuyers in Abu Dhabi to achieve their dream of homeownership. Developed during a time of high interest rates that kept many people in Abu Dhabi out of the housing market, the ARM offers lower initial rates by sharing the future risk of higher rates between borrower and your bank in Abu Dhabi.

ARMs can be an excellent choice of financing under certain conditions, such as rising income expectations, high interest rates, and short-term homeownership. But because payments and interest rates can increase in Abu Dhabi, either steadily or irregularly, homebuyers in Abu Dhabi considering this kind of mortgage need to have the income to keep up with all possible rate or payment changes. Each ARM has four basic components:

* Initial interest rate, which is typically one to three percentage points lower than that of most fixed-rate mortgages in Abu Dhabi. Lower interest rates also make ARMs somehow easier to qualify for in Abu Dhabi. The initial interest rate is tied to certain economic indicators of the real-estate market in Abu Dhabi, that dictate in part what the monthly payments will be.
* Adjustment interval, at the time between changes in the interest rate and how much the monthly payment will be.
* Index, against which banks in Abu Dhabi measure the difference between what they are making on their investment in Abu Dhabi’s mortgage market and what they could possible earn by making other types of investments in Abu Dhabi.
* Margin, or the additional amount the bank in Abu Dhabi adds to the index to calculate the adjusted interest rate on an ARM. The margin is usually between 1.4% to 2.7%.