By Rob Corder
Profit-only home loans to allow lower-income households to get onto UAE property ladder.
Dubai-based Amlak Finance is slashing the cost of mortgages for the first few years in order to make home ownership possible for lower income households.
The company's East Start mortgage allows customers to pay only the "profit" component of a home loan. Profit is charged rather than interest on Islamic-compliant loans, and represents the cost of the money to the lender based on its overall business operations.
Profit rates do not always track inter-bank lending rates over the past year. Amlak's current typical rate of 8.5% is five points higher than the UAE Central Bank's rate of 3.5%.
Easy Start allows new homeowners to minimise monthly payments for the first four years of a home loan. The money saved is then loaded onto the loan for the remaining years of repayment, by which time incomes for the mortgage holder are likely to have risen.
"By lowering the initial required payments, Easy Start is guaranteed to benefit a wide range of customers such as those with limited resources at the time of purchase; buyers who prefer to diversify their financial resources toward other investment portfolios; in addition to expatriates with a short term work contract who rather own instead of rent their homes," Arif Alharmi, chief executive of Amlak, said in a statement.
Easy Start is designed for UAE residents only and applies to both ready-to-move and also under-construction freehold properties. This product is available for all Emaar Properties developments in the first phase for a limited period, and thereafter to all approved Amlak developers.
A loan on a typical 1.4 million-dirham ($381,200), two-bedroom apartment would require profit payments of 119,000 dirhams per year - 14,280 dirhams per month - to be paid during the Easy Start period.