When purchasing a property off-plan, many buyers opt to take a mortgage to cover the final payment due to the developer upon completion, also known as a handover payment. In this case study our client was on a tight deadline to settle the final payment to the developer for her new property. Having previously been declined a mortgage by a few banks, the client approached us to help turn the situation around.
The client was a Romanian national residing in Dubai and working as cabin crew for a major airline in the region, she had previously approached a number of banks directly to secure a mortgage but with no success.
Referred to us by her real estate agent, the client was looking to secure a mortgage to cover the final payment to the developer for an off-plan property purchase in Jumeirah Village Circle. Having already paid 25% of the property price, the client only required a 75% loan-to-value (LTV) mortgage.
As the property was due to handover soon, at which point the client would be required to cover the final payment, she was on a strict deadline to secure the mortgage to avoid incurring significant late payment fees from the developer.
The problem
The client’s employer provided her accommodation as part of her employment package. However, they had agreed to pay her a housing allowance as a lump sum after she had vacated the employer-provided accommodation. In order to meet the affordability criteria for a mortgage the client was hoping to have her housing allowance considered as part of her income.
The reason her application was declined prior to working with us was because her housing allowance was to be paid in the future. This meant most banks would not consider it as part of her mortgage affordability as the funds were not readily available.
You can read more here about buying a property using your housing allowance.
At our first meeting with the client we also became aware that the developer she was purchasing from did not provide a title deed upon handover (it would be provided later down the line). This meant we would also need to find a bank that would be happy to lend on this basis.
We proceeded with the case and submitted a new mortgage application on behalf of the client. We selected a lender that we knew would definitely include her housing allowance, as well as consider her application knowing there would not be a title deed provided upon disbursement (completion).
We managed to secure pre-approval for the client within two days, but all was not plain sailing from this point. Following pre-approval the bank moved forward to valuation of the property. However, at valuation stage the bank’s preferred provider undervalued the property by 15%.
In some cases this may not have been an issue as there are ways which we can work around this. However, the client had already signed a Sales and Purchase Agreement (SPA) prior to working with us. This meant she was now committed to purchasing the property at a certain price. If we were unable to secure a mortgage for the full outstanding amount and within the given time-frame, then the client would either have to find the funds elsewhere to cover the shortfall, or would have to pull out of the purchase completely and forfeit the money she had already paid the developer.
Our solution
When we looked into the case a little further, it became clear that the original valuation provider had not taken all factors into account when valuing the client’s property. The unit that the client was purchasing had additional features, one of which was balcony access, making her unit more desirable and therefore more expensive than other units within the development.
In light of this, we worked hard and used our good relations with the bank to get them to allow a second valuation of the property with a different provider to get another, third-party opinion at the bank’s cost. The second valuation came back in line with the exact price of the property and the SPA that the client had signed.
The result
The bank agreed to lend, taking into account the new valuation. We successfully secured the right mortgage for the client within the limited time frame, avoiding her having to pay additional monies in late payment fees and also having to look for alternate funds to make up the shortfall in the original valuation.
How can we help you?
Having operated in the UAE market for many years, our team has a lot of experience in knowing which banks to approach based on your profile and requirements. We have also developed strong working relationships with the banks.
Case study by Ritesh Shetty, Senior Mortgage Consultant
