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Should I buy with cash or get a mortgage when looking for property in Dubai?

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22 Sep

Although they say cash is king, you shouldn’t rule out borrowing money to get yourself on the property ladder in Dubai. And even if you’re already on it, using someone else’s money rather than your own is a common tactic used by investors when building their portfolio.

Here’s a few things you should note before borrowing money for property in Dubai.

1. Are you a resident or an overseas investor?
If you’re a resident, I would always advise getting a mortgage if interest rates are low and you should be smart with how you leverage debt. Be calculative and smart and look at the product that the bank is offering you. If you’re a foreigner, the interest rates will be higher and they’ll probably only lend 50-60 per cent of the property value. However, the process is quite simple, and with a few documents, you can get your mortgage offer in just a few weeks.

2. Study the maths
Do your maths and see the cash that the property will bring in. If you’re buying the property for yourself, think about how much rent you’re saving, even with mortgage payments. If you’re buying as an investment, calculate how much you’re making on top of the mortgage repayment, interest charges and developer service/maintenance charges. If you’re an investor, you should be aiming to generate between 7-10 per cent so if the figures don’t match, think again.

3. Pick your moment

The finance and banking world changes, and interest rates can fluctuate quite dramatically. There are times when borrowing is so cheap and can be as little as 1 per cent, but there are other times when the rates shoot through the roof. So pick your moment. Be wise. Study the markets and take good advice. Sometimes waiting and doing nothing but watching is the best tactic. There are always cycles, so wait for the best time for you. Most billionaires have made their wealth through real estate, and most of them have been very smart with debt. Debt has never scared me if it’s making money… it’s what we call positive debt.

4. Be careful of other debt
When applying for a mortgage, the banks/lenders will do lots of checks on you to make sure you can afford the repayments. It’s not advisable to apply for a car loan or a credit card before looking at mortgage applications. Too much debt will make you higher risk with the bank and they’ll be less likely to loan you money. I would always recommend speaking with a mortgage advisor that is empaneled with multiple banks so they can negotiate the best product and rate for you.

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