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Mortgage vs. Personal Loan

Discussion in 'Dubai property' started by samsaf, Jul 13, 2008.

  1. samsaf

    samsaf New Member

    Dear Guys,

    Which is better, getting yourself a prop. at launch using a bank mortgage or better get the cash from the bank and pay-off directly?

    Can one resell the property easily if he gets it on Mortgage?

    Thanks for helping out a newbie :D
     
  2. Design Architect

    Design Architect New Member

    I'm a newbie, but let me try

    I'm a newbie two, but let me try and help as much as I can. I think that someone more expirienced will help also..

    So you are asking which kind of bank loan is better - mortgage or personal??? Well, neither of them is good :)

    -Mortgage is a specific loan tied up to a specific property
    -Personal loan can be used for anything that you want, and anytime you want it

    -Mortgage is usually coming with lower interest rate (up to 8%) and longer repayment period (up to 25 years)
    -Personal loan comes with higher interest rate (up to 20%) and shorter repayment period (up to 6 years)

    -So, you can't go to a lunch and buy something with mortgage - because you don't have one. You can get it specifically for that property that you want.
    -You can go to lunch and buy yourself something with personal loan - by paying downpayment (which is usually 10%). But then you need to cover other installments (usually 10% in next three months with another cash payment).

    Hope this helps a little
     
  3. samsaf

    samsaf New Member

    Thanks Design_Architect,

    I was thinking that you can make use of both...
    for example, suppose you get yourself a "pre-approval" first (so you know how much to "aim" for) say, 2.5 Million AED (depending on your salary)

    Then, you borrow some money from the bank (eg. 100,000 DH) which will lower your approved mortgage (comes down to 1.7 million, let's say) and then you use the money from the bank to get the property at launch (esp. if your bank would cover upto 95%)

    Then, as the bank will only start charging you once you get the apartment from the developer, you are left with paying the personal loan only..! (this applies to Islamic Mortages, but I don't know if this applies to other non-islamic ones)

    The question is: How easy (or difficult :D) is it to flip a property under mortage ?? are there any "hidden" expenses that one should be aware of?

    Please gurus, enlighten us with your wisdom :D
     
  4. Roshan

    Roshan New Member

    Hi,

    Generally mortgages take time, hence you require to have to have enough for a down payment.

    The property can be sold if there is a mortgage on it. You will have to pay a peanlty of 2 to 5% depending upon the bank and exit without any problems. This penalty is not important as you would gained more appreciation on the property.

    Approach a mortgage broker who will give you an idea. You learn by asking questions, meeting estate agents.

    Try using the mortgage calculator which is posted on a seperate thread. While you are on the mortgage calculator go to Sunil's site which has tips on investing, good for new investors.

    A mortgage calculator helps you to analyse a deal.

    Regards

    Roshan
     
  5. Design Architect

    Design Architect New Member

    Help is comng

    Yes there is something. In other words - nothing comes for free.

    First - flipping of property has nothing to do with mortgage or loan or anything connected to financing. You can buy it, and you can easily sell it. There is some paperwork in between...

    Second - property itself is going to determine - are you going to have problems in flipping it. If you buy something for 2500dhs/sqft in the middle of desert ready in 2011, you will have HARD time flipping it. If you buy something where rich would like to live - for the same money - you would flip it easy :)

    Third - although you are starting to pay installments on mortgage ONLY when property is finished - if you decide to sell it buy that time - you will need to pay out INTEREST on that mortgage for every month that you had it. If you sell your property in 6 months from signing your contract - you will need to pay 6 months interest to the bank...If your monthly instalment is around 10 000, most probably is that your interest is 6000 per month. So you need to take all of that into consideration.

    Please read Terms and Conditions from mortgage companies - to better understand this matter. BANK ISN'T GIVING ANYTHING FOR FREE - NO MATTER ISLAMIC OR NON ISLAMIC!!!

    Hope this helps...ask more!
     
  6. abbynelson28

    abbynelson28 New Member

    I think at mortgage is a better option if you are going to buy property at launch its long term with lower interest rate.personal loan is just too expensive this purpose and for flipping the properties i guess there are no issues ...just some paperwork:)
     
  7. eyeC

    eyeC Senior Member

    Hi
    first no bank will give 95% mortgage for a property if you can get 80%finance you are lucky

    second banks do check if you have borrowed money from other banks in the UAE

    i think interest rate for personal loan is at 17% from HSBC which is very high so it is not feasible to use this money for home down payment and specially in downturn

    17% means your loan amount will be paid double in less than 5 years

    in theory if you take a mortgage for a home with 20% down payment and if home prices come down a lot the bank may ask you to increase the down payment at a later stage ..so be prepared you might need more money if deflation continues



    check with a mortgage adviser although most of them in the local market here don't know about this
     
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