Understand the types of property insurance policies

Understand the types of property insurance policies

Getting your home insured ensures peace of mind during unforeseen eventualities

When availing of a mortgage or a home loan, the borrower makes a fixed monthly payment known as equated monthly installment (EMI) towards its repayment to the mortgage provider. This payment is primarily made up of interest and capital components.

However, there are additional payments like mortgage life insurance and property insurance that the borrower is also liable to pay. Both insurance policies have a common objective to provide a safety net is case of eventualities at a certain cost. To make an informed decision, it is important to familiarize yourself with the costs.

A mortgage life insurance aims at protecting mortgage repayments. If the borrower dies during the length of the policy, the insurance company undertakes to repay the mortgage debt and the family members of the insured are able to retain a roof over their heads. In the UAE, banks charge in the range of 0.35 per cent p.a. to 0.4 per cent p.a. of the outstanding loan amount as mortgage life insurance, deductible either monthly or yearly. However, in cases where the mortgage amount is exceptionally high or depending on the overall health of the borrower, this percentage may vary.

A property or home insurance safeguards the home owner in case of damage to the property or its contents by virtue of theft, fire, natural catastrophes and or accidents. It is a simple and very affordable means to insure one’s valued possessions. As a standard across banks, this is charged at 0.05 per cent p.a. of the property value and is deducted yearly.

In today’s times, one can no longer proceed with a mortgage application without availing of mandatory insurance policies. Home loan providers and banks do an excellent job of stressing on the importance of the same, and rightly so. Above all, thorough knowledge of these aspects makes the monthly budgeting easier from a borrower’s point of view. These little steps, put together, often go a long way to ensure peace of mind during unforeseen tragedies and provide sufficient protection against potential mishaps.

Mortgage Tips

A mortgage life insurance undertakes to repay the debt if the borrower dies

For mortgage life insurance, UAE banks charge from 0.35 and 0.4% annually

A property insurance safeguards homeowners in case of theft, fire and others

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The Business of Mortgage Settlement Explained.

The Business of Mortgage Settlement Explained.

Buyers and sellers must understand the nitty-gritty of settling a mortgage.

The mortgage market is the vast and quite complex how ever it is important for mortgage settlements to take place as these provide assistant to both homeowners and borrowers property buyers have a ensure several clauses are included in the memorandum of understanding (MoU).

The procedures that a cash buyer who settles a seller mortgage include pre-regostering the mortgage property at the land department which is highly essential using escrow agents undertaking a letter from  the seller to his her bank requesting the bank to release all original property documents to the purchaser only. 

Another major component are the security cheques which are equal to the mortgage.the amounts will be held as security only by the real estate agency and will be returned back to the seller on the transfer date once the property transfer is completed by the seller.

Escrow agents operate as natural third parties on behalf of buyers and sellers in a real estate transection. The seller gives a price on application (POA) in favor of the escrow agent purchaser to be used for security purposes only if the seller attempts to default on his her obligation.

The undertaking letter from the seller to his her bank instructs or request the bank to release all original property documents to the purchaser only. It is inclusive but not limited to banks issuing a no objection certificate (NOC) and title deed to the purchaser or purchase bank. A buyer should also ensure that the seller banks credit the fund a received from him into the sellers loan account and not into the sellers current or savings account and obtain a confirmation from the seller bank for the same. 

The security cheques can also be realised to the purchaser and can be deposited or encased by the purchaser if the transfer is not completed by the seller default on his obligation to complete the transfer to purchaser. 

To make sure you are on the right end of a mortgage closing it is important to follow four pieces of advice avoided any major purchaser before closing your mortgage plan don't make any big or drastic careers changes always prepare for a last minute credit check and always watch out for closing cost surprises  

Property flipping in Dubai

Property flipping

Once left unbated, resulted in a massive spike in property prices.

The act of purchasing a revenue-generating asset(most commonly real estate), and quickly reselling it for profit is referred to as “flipping”.

Several years ago, before the property market crash, it seemed that property flipping was happening everywhere, with adverts for mortgages and loans in every newspaper,and reality TV home makeovers shows dominating the screen. Property flipping seemed all the rage and nowhere more so than in Dubai. Back in 2002,when expats were first given the right to own the leases to their homes,it was common place for them to buy and then”flip” the  lease for property to another buyer once the value of the property had increased. As a result, property prices increased in some areas by as much as 79% according to Better Homes Dubai.

Whilst flipping has been a common practice throughout the world as a way for investors to increase the profit made from investments and make money simply by buying and selling at the right time,it had a significantly negative effect on the UAE real estate market. Continuing unbated property flipping resulted in a massive spike.

“As a result property prices increased in some areas by as much as 79%”

Better Homes Dubai in property prices in the UAE which had the knocked on effect of increasing the cost of living in Dubai. This, in turn, diverted potential investors to other less expensive cities to invest in and resulted in a tumultuous real estate market that was unprepared for the property crash in 2009.

In the ‘’good old days’’, some investors would buy property off-plan and then sell the property at escalated price once it was completed. However, this is clearly no longer feasible as project completion has slowed down significantly, compared to the speed of work during the real estate boom of 2007 and 2008.

New mortgage laws have been introduced to protect against fraud, particularly fraud-for-profit. Only registered financial institutions are allowed to grant mortgages. Those looking to buy and resell off-plan property must provide registration proof with land department. The sheer amount of paperwork required can inhibit the speed at which potential flippers could buy and resell properties.

Speculation Flipping

Speculation flipping is the act of buying a property low and then selling it at a higher price simply based on market speculation of what the property will be worth, without adding anything to validate or justify the increased price.

It can be viewed as “predatory” in nature since it usually involves taking advantage of investors or buyers with fewer options and less information available to them.

Whilst Dubai is making an effort to curb this practice and regulate the property market, more transparency is required throughout the buying process, so that investors are not left to base their decisions on whatever(mis)information they are given.

Fix & Flip

In the case of ‘’fix & flip’’, the “flipper” puts in knowledge and effort to make the property better and add value to it, therefore making it logical to command a higher market price.

This may involve making both cosmetic and construction improvements such as refurbishing or redecorating the property,landscaping or improving the inner workings of the property such as the water or electrical mains.

Another way of making a profit is by investing in up and coming areas where prices are projected in increase dependent on the introduction  of local amenities such as transport links,schools and shopping malls. Not to be confused with property flipping, this form of investments takes time to mature and is a valid reward for investing in the right place at the right time.

Property Flipping