sage & onion wrote:arniegang wrote:If bought off plan Sage, then no mortgage lender will release all of the agreed amount until the project is signed off.
The banks then reserve the right to make a valuation of the property for mortgage purposes to release the balance of the funds.
If that valuation does not concur with the original asking price then the bank will not release the funds and insist the purchaser find other means of finance by way of a 2nd mortgage.
They wont be able to secure further borrowing because 90% of the banks have adjusted their terms in respect to LTR (loan to value).
Its a time bomb waiting to happen mate.
In this case is the money not paid into an Escrow Account?, forgive me for not understanding the process, it just doesn't seem correct the way that your explaining it.
Mate
When buying off plan stage payment are made into an Escrow account.
So lets say i bought in Marina Mall in Oct 07 for 3 million. I would have paid an initial depostit of 10% or 300k Dhs. This would have been my 10% mortgage deposit on the assumption i was looking for a mortgage @ a 90% LTV (loan to value).
The bank would have made further stage payments as per the contract also to the Escrow account.
As Marina Mall isn't due to complete until the end of this year by now all the stage payment upto 60% of the purchase cost have now been made.
On completion the bank will have to forward the final 40% to complete and the owner can then take possession.
The banks in Dubai (and in the UK) are now valuing properties at completion. If the valuation is less than the original selling price the bank has the right to say to mortgage customer
"we are not lending you 90% of the original price, as per our contract we are only going to lend you 90% of the valuation. As the valuation is now 2 million AED we will not advance you the 40% to complete your purchase. You are now required to find the remaining 40% from your own or other sources".
So basically, now the purchaser is up the creek. He has a debt by way of a 50% mortgage (plus his original 10%) totaling 1.8 million Dhs. His property is valued around 2 million by the bank but he still requires a further 1.2 million dhs to take possesssion.
Unless he has 1.2 million in cash he is basically stuffed. Even then he is double stuffed knowing he has to find 3 million to complete on a property worth 2 million.
It is called Negative Equity Sage. This is the mortgage problems facing many Brits and Americans now. Those who bought in the peek at vastly inflated prices at a high loan to value, cannot now remortgage or sell because the amount they owe to the bank will not pay off or clear the original debt. The house or appartment is also worth less than the original mortgage.
This is why 90% of all the banks in Dubai are not lending to those with a large deposit of around 30%. The banks know full well in a declining property market it is financial suicide to lend at a high loan to value ratio.
Established banks with much expertese in established property markets like LloydsTSB, have put a 50% LTV cap on Villa mortgages in Dubai. They have suspended all appartment mortgages.
This to me is the indicator that their projections indicate the property slump in Dubai is going to be in excess of 50% for villas and even more for appartments.
the rich will come back, so is Arnie. 
