The Life: A reader is concerned about the additional costs attached to the purchase of a property in Dubai.
Bound for The Greens in Dubai, but burdened with fees
I am in the process of buying a two-bedroom apartment in The Greens in Dubai but there seem to be endless fees in the mortgage process. What are the fees I am expected to pay, and what shouldn't I be paying when I take on a mortgage? RM, Dubai.
There are many fees to take into consideration that are over and above the actual purchase price of the property - real estate agency commission, Land Department charges, mortgage agreement fees etc. The list goes on and on. Before speaking to agents or viewing properties, get pre-approval from your bank or mortgage brokerage. The pre-approval charges can cost between zero and Dh5,000, depending on which bank is used. Once you have the pre-approval you are ready to find a suitable property and can apply for the mortgage.
Whether you go directly to a bank or use a mortgage broker will determine the fees charged. But for the purpose of this illustration, I will assume the buyer has used a brokerage mortgage firm. The lender bank will require a valuation of the property. This normally costs about Dh2,500 and will determine how much of the loan will be guaranteed. Within the loan documentation, there will be other bank fees to consider: 1 per cent of the loan for processing the mortgage, life insurance charges of about 0.4 per cent of the loan per year and annual property insurance charges of 0.06 per cent of the loan. Brokerage fees vary but are normally a percentage of the loan.
When the buyer is ready to transfer at the Land Department, the final charge, other than the transfer fee of 2 per cent plus Dh315 to the Land Department and 2 per cent to the estate agent, is the mortgage registration fee. This is 0.25 per cent of the loan and ensures the title deed has a notification that the property is bought via Bank finance.
Before signing any financial documentation, make sure you read the small print as there are other charges to consider once you own the property. For example, what happens if you want to repay the loan quickly? Most banks will charge 1 to 3 per cent of the loan for the first few years, after which it is normally free. Some will allow 20 to 30 per cent overpayment per annum to reduce the loan quicker. What if you want to remortgage at a later stage? Some banks will charge a penalty for this of about 5 per cent of the loan. This would, on the face of it, appear to kill any competition between banks for remortgage business. The Central Bank is looking into this as it contravenes a free market. This, along with the proposed mortgage cap, will be finalised by the Central Bank later this year.
Why do agents insist on flouting the laws of the Rera calculator. They know the law, yet they still allow landlords to raise rents higher than the calculator. Surely a responsible agent should make it clear to landlords that they can't raise rents above what the law dictates? GM, Dubai
Companies from around the world have opened up practices in Dubai and follow predetermined industry service levels. Others have just one office and trade on the back of a positive property market and hope for the best. Because of this discrepancy in service and professionalism, the industry suffers and clients become wary when dealing with brokers.
While most of companies trading have all passed the Rera exams to enable them to transact within the property market whether for sale or rent, there are still a minority of freelancers that continue to flout the rules.
Always be careful when dealing with agents and request they show you their broker accreditation. This way you can be assured that should things go wrong, you at least have some redress or course of action to rectify.
All registered brokers should abide by the response to the calculator and it is only the weak or unregistered agents that allow themselves to be swept along by the wishes of the landlord alone.
It is also important to nurture a positive relationship with your landlord, who also has a responsibility to their tenant and once they enter into an agreement, they need to remember the terms of the agreement when renewal time comes around.
Moving is often stressful and ignorance of the regulations adds to the stress but sadly is commonplace among parties. My advice is to seek a solution by dealing directly with the landlord. If this does not work then, provided the tenancy is registered at Ejari, I would file a case and take it to the rent committee.
Mario Volpi is the managing director of Prestige Real Estate in Dubai and has worked in the property industry in London and Dubai for the past 29 years. Send any property questions to firstname.lastname@example.org