We are watching the market since long and now in 2016 willing to do our first real estate investment. But not sure whether to buy a house to live on or use as the investment property, kindly advise me what the benefits of buying as an investment are? And how you perceive the market?
Well, 2016 will continue to witness sustainable evolution in the real estate market. Keeping an eye on Expo 2020, definitely Dubai property market is gearing up for diversified growth and expansion strategy which will keep up the market momentum. Therefore, if deciding to capitalize in real estate then definitely expect high principal appreciation in long-term.
However, the question of where to invest -buy to live or buy to let remains skeptical as it depends on your financial plan and the requirement. If you can continue living at the same place and get into the real estate investment market then, you can enjoy the high rental income along with the benefits of capital growth. If you take mortgage finance to buy an investment home, the interest on the loan and most property expenses can be countervailed against rental income, and savings can be placed in an offset account and can later help to diversify the investment portfolio.
Dubai real estate market endow wide alternative to select from. You may find some properties worthy for investment, but the like may not be ideal to live in, reason can be anything- location or size. Hence, finding a property that costs less may be easier if not planning to live in it, as it’s less abstracted by emotional concerns and can be decided quickly. Thus, I would say calculate your personal circumstances and preference and invest accordingly.
I am planning for mortgage finance. Can you guide me what all things I should consider while selecting a lender?
However, still remember few points before finalizing lender – starts with market research and try to understand different mortgage products offered by various lenders. Look for the best interest rate and don’t miss to understand bank margin rate which will be applicable after the fixed loan period. Request the complete amortization schedule from lender to calculate the monthly charges.
Consider lender who offers a range of both customized and prime mortgage finance product that suit individual need. Finally, never overlook to calculate the additional property transaction cost. Having a lender who is an acquaintance, prompt and provide modified service after taking the loan can create a world of difference both initially and through the loan tenure.
When we have so many options in the market, how one should prudently decide on a property to buy?
Dubai real estate market has the enormous list of residential properties and it’s very complicated to decide which apt for you. There has been a momentous increase of fresh inventory which has been inducted in last six months with eye-catching pricing and payment options from the developers. As they have understood the changing market dynamics and need for affordable projects. Still, if buying property for asset purpose, view renowned locality where development should hold quality construction, which will benefit in the long-term with superior returns, on the contrary if buying for own usage peek for options which match your lifestyle, convenience, and preferences.
What’s the best strategy to refinance a mortgage that has been signed off years ago at far higher rates?
Positively, for prevailing mortgagor with all-time low interest rates, it may be the good time to opt for a refinancing. Considering the refinance, owners have the potential to reduce the cost of their mortgages and gain financial flexibility in the long term. There are numerous benefits associated with it, refinancing a mortgage can lower monthly EMI, helps to pay off the loan faster, consolidate the debts, unlock the property equity and also give comfort to move from adjustable rate to fixed rate loan or inversely.
Majorly there are two ways of refinancing Rate-and-term refinancing and Cash-out refinancing. In Rate-and-term, you save money by abbreviating monthly installment, with the same property as security and pays off one loan from the new loan. It brings up to several strategies, including switching from a variable rate to a fixed rate. Refinance allows to saves thousands while taking the benefit of lesser interest rates or curtail the tenure of the loan to form equity faster.
Cash out refinancing is a fresh mortgage finance taken for extra money and is for those who want to access equity on the current property. It leaves the cash above needed to pay off the existing credit card and loan debt, closing costs, home improvements, and any mortgage liens paying off.
Are there any Islamic banking finance formats that are particularly useful to refinance a mortgage, i.e. by switching from a conventional to Islamic financing?
There has significant trend witnessed over the earlier few years is the institutionalization of the Islamic mortgage finance segment as a key pillar of the Islamic retail asset suite. Additionally, clients now approaching banks for a secure mode of refinancing alternative through Ijarah, where a bank buys the property from the owner and leases it back to the client while keeping the valuation of the property higher than the amount financed by the bank. In regards to Islamic mortgage lenders have now established a better understanding of the legal system. This experience has aided the sector in creating the expertise, improved understanding of risks and overall confidence in the legal system.
A market study shows that Islamic institutions presently serve above 50 per cent of the market demand, up from approximately 35 per cent last year. This emphasizes a shift in consumer mindset and overall acceptability of Islamic financing products in the market. In terms of growth rates the Islamic banking sector has been increasingly coming to the fore surpassing the conventional lending section. Considering the numbers, last year Islamic banking assets in the UAE increased by 15 per cent whereas the conventional bank rose less than 10 per cent. We believe that Islamic banking products can contend on an equal footing with conventional banking services.