In today’s dynamic financial landscape, homeowners are exploring innovative avenues to leverage the value of their assets. Equity release is a versatile financial product that offers homeowners the opportunity to access their property’s equity while retaining ownership. As financial flexibility and future planning become paramount, these offerings serve as a lifeline for homeowners looking to secure their financial well-being and achieve their long-term goals.

Understanding Equity Release: What is it?

Equity release, also known as loan against property, enables homeowners to access the equity tied up in their property. Homeowners may consider an equity release loan for various reasons, such as home improvements, paying off debt, business investments, etc.

Equity release loan is a loan taken out by an individual against a self-owned mortgage-free property. The bank mortgages the property after assessing the credit worthiness of the client and conducting an evaluation of the property. Subsequently and upon approval of the loan, the funds are provided to the client. The Loan-to-Value ratio (LTV) applicable is within the cap mandated by the Central Bank as well as per the bank’s specific policies. Currently, the maximum LTV ratio for Expats is 80% of the property value. Most importantly, the client still remains the owner of the property.

As an example, if you purchased an apartment in Dubai five years ago and due to the booming real estate market, the current market value of your property has appreciated. With the equity release option, you can tap into the built-up equity in your property and secure a loan for your specific needs by mortgaging it to the bank.

Benefits of an Equity Release Loan

• Financial Flexibility: Equity release provides homeowners with a flexible way to access funds for various purposes, such as home renovation, children education, medical expenses, or retirement planning.
• Competitive Interest Rates: In case of an equity release loan, lenders typically offer lower interest rates as the loan is secured by a property in comparison to an unsecured loan.
• Lower Monthly Repayments: With lower interest rates, your monthly repayments are also lower in comparison to personal loans.
• Retaining Home Ownership: Unlike selling a property, equity release allows homeowners to retain ownership of their home while still accessing its value.
• Disbursement Options: Having the option to obtain a lump sum of money can be helpful if you’re looking to buy another property in the UAE since the down payment requirement is higher for second property purchases. Additionally, banks provide a variety of options allowing homeowners to choose the plan that best suits their financial needs.

Eligibility Criteria for An Equity Release Loan

• Age Requirement: Similar to other mortgage loans, applicants are required to be of legal age i.e. minimum 21 years old to apply for an equity release loan, while the maximum age at the maturity of the loan is capped at 65 years for Expats Salaried and 70 years for Expats Self Employed and UAE Nationals.
• Documentation: To apply for an equity release loan in the UAE, you will need to provide documents such as a copy of your visa and passport, a copy of your Emirates ID, a salary certificate for proof of employment, and proof of residence. These can vary depending on the bank you’re borrowing from.
• Debt Burden Ratio: The maximum DBR allowed is 50% i.e. 50 percent of gross salary and any regular income from a defined and specific source at any time. In other words, you can only use half of your income to pay your debt (monthly mortgage payments, credit card bills etc.).
• Credit Score and Income: Having a positive credit score and a stable income can have a significant impact on your loan amount when applying for an equity release loan.

How can Lion Mortgage Help?

Lion Mortgage follows a streamlined process to facilitate your mortgage requirements:

• Consultation: Schedule a free consultation with us to discuss your financial goals and assess your eligibility. Based on this, our experts will provide mortgage options as well as lender recommendations that align with your specific needs.
• Property Valuation: A professional valuation of your property will be conducted by the bank’s appointed valuation agency to determine its current market value.
• Loan Offer: Based on the property valuation and your eligibility assessment, we will ensure you get a personalized equity release loan offer, outlining the terms and conditions.
• Legal Advice: Before proceeding, homeowners are advised to seek independent legal advice to ensure a clear understanding of the implications and obligations associated with equity release.
• Approval and Disbursement: We will work closely with the bank throughout the mortgage application process until the loan is approved and the funds are disbursed.

Connect with Lion Mortgage for expert insights, a wide network of banks & lenders, and personalized services that make your equity release loan application process seamless.

Disclaimer: The information provided in this blog is accurate as of the date of publishing and in accordance with existing regulations, policies and norms. However, please note that circumstances/ policies may change over time, and it is advisable to verify any information with relevant authorities or experts before making decisions.