A 75 percent loan to value (LTV) for expatriates and 80 percent for UAE nationals, seeking to purchase their first house, has been proposed by the Emirates Banks Association (EAB), the trade body representing banks in the UAE.
EAB has also proposed 60 percent LTV for expats and 65 percent for UAE nationals for purchase of their second and subsequent houses.
The EAB has proposed maximum home loan tenure of 25 years for expatriates with maximum funding of up to seven years salary, or total income. The proposal was submitted by the association, on behalf of all the banks.
The maximum financing amount proposed was eight years’ salary, or total income for UAE nationals up to seven years’ or total income for expatriates.
As for the source of payment, the association recommends payment from salary and/or any other verifiable regular source of income, including rental and business income, but, excluding end of service benefit, for both UAE nationals and expatriates.
The maximum repayment period suggested was 25 years, subject to 70 years of age for last instalment for UAE nationals, and 65 years of age as last instalment (70 years if self-employed).
Accepted collateral provided to be the first class mortgage on the financed property or second-degree mortgage in the case of properties financed under various government housing schemes.
In case, a borrower retires during the loan period, the amount of instalment need to be adjusted to his new income, or loan should be rescheduled to maintain a 50 percent debt service ratio, taking into account all regular income.
Further, the Central Bank will include other aspects into regulations such as transparency in publishing of all fees and interest rates, including calculation of interest/profit rate, with clear pre-payment guidelines clarified at initiation.
The EBA Chairman, Abdul Aziz Abdulla, said that the association is hopeful of closing the chapter once and for all with the apex bank, towards second half of the year.