Cash vs Mortgage: Which Option is Better to Buy Property in UAE?
You have made all the necessary strategic decisions to finalize the location of your real estate investment. You have selected the type of residential unit you want to go for. And you have ultimately found the dream property in the UAE you have been looking for to make a smart lifetime investment. But you still need to answer one last hurdle to clear the purchase. How will you pay for it – cash or mortgage?
The real estate market in the UAE is among the most vibrant in the world. It draws significant global attention for the dynamic avenues it presents to its investors in the form of multiple payment options. Paying upfront can seem overwhelming for many, which is why options for mortgages are plentiful in the nation.
But, which of these payment options is most feasible? Which one should you opt for a smart investment? What are some of the advantages and disadvantages of buying a property in the UAE through cash and mortgage? We uncover the answers to all these as we take a deep dive into the comparisons of these two most popular buying methods of property in the UAE real estate market.
Buying Property in the UAE with Cash
Buying a property with cash in the UAE can seem intimidating at first glance. After all, this is not grocery shopping that you get to partake in weekly. This is a lifetime investment and involves an outstanding amount of money. The feasible nature of the economy of the UAE makes it a safe place for rich families, who are always on the lookout for buying properties and settling down here.
Advantages of Buying Property in the UAE with Cash
Here are some of the most notable advantages of buying a property with cash in the UAE.
Cost-effective
The most apparent advantage of buying a property with cash in the UAE is that it is less expensive when compared to its mortgage counterpart. When you are buying the property with cash, you don’t have to bear any additional cost which spikes the final price in the long run. Usually, with a mortgage, you need to pay an extra amount in the form of interest which increases the price from the original price of the property.
Not to forget, you will also be free from paying other types of expenses such as mortgage processing fees, bank fees, closing costs, and other allied costs that are usually applied to transactions. If you calculate efficiently, you will find that you have saved up on a lot of costs in the long run.
Time-saving
In addition to saving extra costs, you will also save valuable time when you choose to buy a property with cash in the UAE. This is because you don’t have to engage in a bunch of paperwork and procedures that often eat away time, making the entire process tedious and time-consuming.
Getting approval for a mortgage and finding and preparing the documents needed to be eligible for the mortgage and the transfer of the property to your name can sometimes be a taxing process. This is something that you want to avoid if you can.
Hassle-free Process
Transactions that are made through cash are less complicated. They involve fewer procedures than their mortgage counterparts. Buying a property in itself is a daunting task and the more you can simplify it, the less stress you need to bear; and a cash transaction ensures just that.
With minimal procedures, you can focus on more pressing post-purchase issues about your property such as customizing it, decorating it as per your need, finding apt tenants, etc. Overall, you end up saving a ton of energy when you buy a property with cash.
Things to Consider While Buying Property in the UAE with Cash
When you are buying a property with cash, you need to remember that you are tying your cash with the property which can significantly limit your liquidity for emergencies and other investments. Furthermore, market downturns can bring concentration risk as well.
You do get a bit more negotiation power when making cash transactions which ultimately helps you in securing a better deal, especially when you buy directly from the owner or developer. However, you must not overestimate the spending limit. Yes, you don’t have to worry about making monthly payments as part of instalments, but you should ensure you have adequate savings to sustain yourself both in the near future and long run.
Buying Property in the UAE with Mortgage
You will find a wide range of lucrative and smart mortgage plan options in the UAE, made to safeguard the interests of buyers and open up opportunities to buy properties for them.
Advantages of Buying Property in the UAE with Mortgage
If you are buying a property in the UAE with a mortgage, then you can avail of the following advantages.
Increased Affordability
Since you don’t have to worry about paying the entire money altogether at the start of the deal, this increases affordability options. As such, the pool of options for you increases. You can look into buying properties that otherwise would have been out of the budgetary constraints.
In addition to this, you also get to improve your leverage options when you buy a property in the UAE with a mortgage. A mortgage enables you to leverage your capital, which, in turn, allows you to invest in several avenues at the same time.
Emergency Liquidity
Letting go of a huge chunk of money, which for more people than none, is often a lifetime investment, can be worrisome. When you spend almost a huge portion of your savings, it makes you vulnerable for future, and especially emergency expenses.
The future can be unpredictable. Buying a property with a mortgage keeps you more prepared for any financial uncertainty that you might encounter, as it won’t leave you empty-handed. You get to save up liquidity for emergencies or other unexpected expenses.
Manageable Financial Flexibility
Most reputed property developers in the UAE offer lucrative and flexible payment plan packages, that allow you to manage your finances smoothly. Since these instalments are of a compartmentalized payment plan method, you have to only shell out a manageable and limited amount of money at regular intervals.
While investing in off-plan properties, you can divide your payment as per the different stages of completion of the project. In this, you make a portion of the payment during the start, with some during construction, and the final on the handover of the project. This also keeps the developers accountable to maintain the completion date of the project.
Things to Consider While Buying Property in the UAE with Mortgage
Off-plan mortgage in Dubai or anywhere else in the UAE means that you end up paying more than the total cost of the property due to interest rates. Not to mention, finding approval for mortgages can be troublesome at times as you have to have strong credit, maintain a steady income source, fulfil minimum salary requirements, and other conditions laid out by the lender.
Indeed, a loan for buying property in Dubai and the rest of the UAE can ease your affordability, but you need to be aware of the market risks, including fluctuations in interest rates that can strongly affect financial stability and mortgage payment ability.
Cash Vs Mortgage: Final Verdict
To conclude the debate of which mode of payment – cash or mortgage – is better for buying property in the UAE, you have to assess your financial health. Remember, just simply replicating the methods of your friends and family will not be feasible. What may work for others may not work for you and vice-versa. Therefore, being aware of your own financial situation and taking steps accordingly is a wise move.
Many people keep their savings ready for such a humongous investment. It differs from person to person, or in this case, investors to investors, as to what their priorities, preferences, affordability, and requirements are.
You need to consider your income consistency as well as savings to determine the payment option. Moreover, we strongly recommend you learn about the current market developments of real estate, such as interest rates, the dynamics of demand and supply, as well as prospective prices of properties.
The government has also initiated several steps to encourage buying property in the UAE for expats. Most notable among them is the UAE Golden Visa which enables expats long-term residencies in the nation who make real estate investments worth at least AED 2 million.
At the end of the day, you should opt for a cash transaction if your cash reserve is sufficient enough that it won’t compromise your financial stability. If you are looking for more negotiating power along with a simple, quick, and rapid transaction, and if you are confident about the stability of the market and its growth potential, opt for cash.
Otherwise, if you want to save up your cash for emergencies and other future investments, then opting for mortgages is recommended. If you think you can handle the market swings and are presented with low interest rates and a flexible payment plan, then there are no reasons why you shouldn’t opt for a mortgage option.
BNW Development's Flexible Payment Plan
Here at BNW Development, we believe in allowing everyone to have access to their dream luxury property. This is why; we offer a flexible payment plan package to interested investors. Our esteemed luxury residence project – Aqua Arc – in Al Marjan Island in Ras Al Khaimah features a compartmentalized payment plan system that helps investors manage their finances better.
You don’t have to worry about providing the entire sum of money and can hold off your payments and make small instalments instead. The booking amount for Aqua Arc is just 10% plus AED 3,000 as admin fees.
You have to make 50% of the total payment during the construction stage, and 10% on handover. The final 30% of the payment can be done after the handover of the project. This widens the pool of investors as this breakdown is extremely favourable and manageable.
FAQs
Commonly Asked Questions about Cash vs Mortgage
Can I buy a property in cash in Dubai?
Yes, you can buy a property in cash in Dubai. There are no legal restrictions attached to it. In fact, cash transactions of properties are often the most cost-effective ones. You also get to close the deal faster and have better chances of negotiating the final price.
Can I buy property in Dubai on a mortgage?
Yes, you can buy a property in Dubai on a mortgage. Various banks and financial institutions tie up with top-notch developers to make it easy for interested investors to procure a mortgage to buy properties. As long as you fulfil the lender’s requirements, have a steady source of income, and a healthy credit, you can secure a Dubai property loan.
Can a non-resident get a mortgage in Dubai?
Yes, a non-resident can get a mortgage in Dubai to buy the property of their choice. Some of the best home loans in Dubai are open for non-residents, expats, and international investors as long as they meet the set requirements laid down by the lending institutions or banks.