One of the major dilemmas people face, when completing a big real estate transaction i.e. buying a home in Dubai is whether to opt for cash or mortgage. Both these options have their own sets of pros and cons.
While, on paper, buying a home on cash seems like a better idea as there is no lending involved and neither are complications associated with it. However, the process isn’t exactly that simple. Using all your life-savings at once, for a single transaction. May leave you in a lurch in case of an emergency situation.
This is why it is important to consider both these options and weigh their pros and cons before making the final call.
The biggest of all benefits if you want to buy property in Dubai using cash is that the buyer doesn’t have to pay interest. On the other hand, in the case of mortgaging, the borrower has to pay the interest along with the principal amount, which can prove to be an additional burden on the pocket.
Mostly, sellers and developers prefer buyers who are willing to make payment in cash. This shortens the whole process as there are no bank approvals and other such complexities involved. The buyer only has to pay the cash and the property is reserved under their name. If the property is ready to be moved in, they can immediately shift their belongings there without any ado.
Some sellers and developers, in order to encourage cash payments, offer a special discount, known as ‘cash discount’. This way, buyers can save more money while buying the property.
It is important to note that this discount doesn’t come with all properties. Only selected sellers give this discount.
In case of mortgage/home loan options, an individual has to meet certain eligibility criteria to be able to get their loan application approved. However, this isn’t the case with cash financing. Anyone can buy a property with cash, regardless of their credit score and history. Furthermore, there are no eligibility criteria to be met.
The flipside to using cash, as stated earlier, is that it leaves one with limited to no financial resources as they have used all the cash they had for making the payment. This blocks their funds until they are able to sell their property, which, in some cases, can take a long time, depending on the market conditions.
Without any doubt, the most prominent benefit of going for the option of a mortgaged house in Dubai is that it is suitable for those who can’t arrange cash. This way, salaried people can also turn their dream of becoming a homeowner into reality. Banks and financial institutes offer different types of mortgage in the city. Interested buyers can select any type that deems suitable to them and secure the deal of a residential property that suits their interest.
Some people, even if they have sufficient cash, prefer mortgage options as it helps them to save up for emergency situations.
With mortgaging, an individual gets more financial flexibility. If their credit score is good and they maintain a robust credit history, they can apply for more than one loan and invest in different projects. They do not have to be in the same industry. This not only diversifies their investment portfolio but also allows them to earn more profit.
The flipside, of course, is the additional amount the borrower has to pay as the interest. In case, the borrower misses out on paying an instalment, the interest keeps accumulating, making it even more difficult for them to manage repayments.
All in all, the ultimate choice is yours. Carefully analyse your financial situation and then make a decision. If you have sufficient money and surplus funds to tackle emergency situations, cash purchase is certainly a better idea. In case you don’t have enough cash, go for a mortgage option to secure the deal for the house for sale in Dubai you wish to buy. However, ensure that you have maintained a good credit score and history otherwise, you will face difficulties in getting your loan application approved.