Banks in Dubai dont offer fixed intetest rates on Mortgages

[Mohamad Mehieddine]

I live in Abu Dhabi, United Arab Emirates (UAE). I purchased 2 off-plan studio apartments in a span of 6 years, without taking a bank loan. I paid cash in full from my saving (proprieties are worth about 300k$ now).

My goal once construction is completed (expected by 2020) is to rent them out and start earning passive cash flow.

I would like to purchase another house soon but can’t use the same strategy anymore, which is putting all money in, as I no longer have enough cash. However, I do have the 20% down payment shall I decide to take a loan from a bank.

I am hesitant to take a loan from our local banks. Banks in UAE don’t offer fixed interest rates on mortgages, but for a maximum of 5 years only (interest rate is currently at 4%). After 5 years, the interest rate will change depending on the local central bank, it might go up to 6-7% or low to 2-3%, or might remain the same (god knows).

So if I decide to have a payment plan for 20 years, how shall I calculate my numbers and do my math? In terms of what kind of risks I should factor etc

When I made my calculation, if interest rate is at 4% (first 5 years), I would be getting 400$ of passive cash flow (after cutting expenses). However, once the 5 years are over, if the interest rate raise to 7% (worst case scenario) I would end up getting 90$ monthly.

I know the property will appreciate by time, but my aim is not to sell, but earn a monthly income (which I can save an reinvest again). But to be honest I just feel the 90$ wouldn’t be worth the hassle and I should just drop the idea..

Please share your advises