How a Home Equity Loan Works & Benefits
Are you surfing the web to find the finances for your home renovation or to cover unexpected expenses? Home equity loans can help you in a better way. This loan is designed to help you arrange funds for several financial projects or needs.
4.6/5
24,098
Reviews
Get Home & Mortgage loan at Lowest Interest Rate
In the UAE, homeowners are using a home equity loan for various purposes, including buying a new property, remodifying a home, repaying debts, and more. Scroll down this article, and understand more about this loan type.
Top Home Loan Plans in UAE
What is a Home Equity Loan?
A home equity loan, also known as an equity loan or second mortgage, is a type of loan through which you can borrow a large sum of money using the equity of your house as collateral. You can get this loan from financial institutions or banks on the appreciated value of your property.
It is helpful for homeowners in many ways, such as paying off the existing mortgage interest or making strategic investments. Typically, they have fixed interest rates and tenure, which means that you can plan your future finances accordingly.
Pros and Cons of Home Equity Loan
We have mentioned the pros and cons of a home equity loan for your better understanding:
| Pros of Home Equity Loan | Cons of Home Equity Loan |
|---|---|
|
|
Eligibility Criteria for Home Equity Loan
In the UAE, expats and nationals can take a home equity loan by meeting the eligibility criteria established by the banks.
UAE nationals have the advantage of typically borrowing a loan of up to 85% of the value of their property. On the other hand, this rule might be stricter for expats as they are only allowed to borrow a maximum of 80% of the property’s value.
Other factors also play a crucial role in determining your eligibility for a home equity loan, such as your credit score, existing liabilities, income, and more. With a good credit score and a stable income, you can easily take out an equity release loan.
|
🔔 Heads-Up: Don’t take the maximum amount of loan just because you are qualified for it — make a decision that aligns with your long-term goals! |
How to Get a Home Equity Loan in the UAE?
Following a few simple steps, you can access a home equity loan in the UAE:
- Check your eligibility before applying for a home equity loan. Your home equity should be higher than the liability you owe, and you should have a good credit score.
- You need to submit some basic documents, such as income proof, property ownership certificate/paper, and more. So, be ready with them.
- Research and compare the interest rates, tenure, and financing options by different lenders in the UAE.
- Choose one offering the best home equity loans with better terms and start making EMI payments on time.
How to Calculate Home Equity?
If you are wondering “how much home equity loan can I get,” the answer largely depends on your home equity. So, how would you calculate this?
It’s easy to calculate home equity as it’s the difference between the value of the property and your current liabilities.
Let’s understand this with an example:
The market value of your property is AED 2000,000. Let’s say the existing loan balance is AED 70,000. Then, the home equity will be calculated based on the formula:
- Home Equity = Value of the Property- Existing Loan Balance
- Home Equity = AED 2000,000- AED 70,000
- Home Equity = AED 1,930,000
So, in this case, your home equity amount would be AED 1,930,000. You can apply for a home equity loan based on this value and utilise the funds for various financial needs.
Frequently Asked Questions
A home equity loan is a loan in which you take on the equity of your property as collateral. It works like the other loans, meaning you borrow a certain amount and then you need to repay the money in the form of monthly EMIs for a fixed year or term.
The basic difference between home equity loans and home equity lines of credit is the interest rate. In home equity loans, the interest rate is usually fixed for the whole loan tenure. But in home equity lines of credit, it fluctuates over the tenure based on market conditions.
You can get a home equity loan even if you have no mortgage. For this, you need to contact the lender, and they will guide you on how much amount you can borrow on what interest charges and terms.
Equity release is a cost-efficient option if you are about to renovate your home, need finances for business expansion, and more.
It depends upon your nationality, type of lender, and the property’s value.
Yes, home equity loans are beneficial for individuals looking to revamp their property or increase its value.
International Mortgages Loans
International Mortgages Loans
More From Home Loans
- Recent Articles
- Popular Articles
