Can your house offer you liquidity without being sold or rented out?

Most people are not aware that their debt-free property can get them lump-sum cash without the requirement of having to sell it. This is what equity release loans are all about – a financial product that can help you unlock the hidden value in a property that you own.

Equity release is a common lending option being offered to homeowners around the world. It is popular amongst many retirees around the world who are looking to supplement their income, by leveraging a debt-free property that they own. In many international markets, it is specifically marketed to people over 55 years of age, where they are typically not required to make any monthly repayments. Over the last few decades, it has grown in popularity as people live longer and require additional income to support their expenses and lifestyles.

Equity release home finance in the UAE

Equity release, also known as loan against property, is provided by several banks in the UAE; however, it’s marketed to a wider group of homeowners who are looking for a fast and easier way to access cash to pay for home improvements, purchase a second property or pay for other bigger expenses. For many, it’s a viable option considering the high percentage of investors who buy properties in cash who could benefit from the extra liquidity when the market slows down.

Some are available to all homeowners in the country who have a title deed for their property, while others are only available for UAE nationals. It’s also a far more attractive option for investors who are planning to purchase a second home. Under current mortgage rules, expats can only borrow 60 percent of a second or subsequent property’s value, while UAE nationals can only borrow 65 percent.

Among the banks who offer home refinance products to UAE residents, Abu Dhabi Islamic Bank, for example, positions the product as a way for an owner to increase their investment portfolio, or use the equity to start a business or build a dream home. With ADIB, those who avail of this product, can get access to up to 70 percent of their property’s value.

Emirates NBD also offers a loan against property to expats and UAE nationals with a loan-to-value of up to 70 percent. Expats can get a loan of up to AED 7.5 million for a maximum loan tenure of 20 years. Noor Bank and ADCB also offers similar mortgage refinance options.

Browse through almost 70 different home loans available in the UAE.

What to watch out for

With any loan product, it’s best to read all of the fine print. Be sure to read up on the terms and conditions on interest, which can accumulate quickly, leaving you or your family with less equity over time. Also, watch out for any additional or hidden fees and penalties. Often personal finance advisers recommend older homeowners to explore alternative options before deciding to go the equity release route, such as selling a high priced property and relocating to a smaller house.

Also be aware that equity release loans increase the duration of your mortgage repayment period, which means that you could end up with debt even in your retirement years.