Citizens and residents have reported that several local banks are reluctant to grant mortgage financing to government employees aged 50 and over due to concerns about early retirement. This requires restructuring the loan to ensure that the monthly installment does not exceed 30% of the retirement pension.
They told 'Emirates Today' that the majority of banks refuse to provide financing unless the client agrees to a short repayment period of no more than 10 years, which makes the monthly installment high and incompatible with the income. They noted that these same banks agree to a repayment period of up to 65 years for residents and 70 years for citizens, or if the client has their own business.
They called on banks to be flexible regarding the age requirement and to comply with the Central Bank's mortgage financing regulations, which allow residents to take out a loan and repay it until the age of 65, and citizens until 70. They pointed out that some people do not have the opportunity to own property at a young age and start repaying until their financial situation improves enough to allow for a 50% deduction from their salary without issues.
In response, banking expert Ahmed Arfat explained that some banks have reservations about providing financing to government employees aged 50 and over, especially after the decision to allow retirement after 30 years of service instead of the previous 35 years. Therefore, these banks prefer a short repayment period of no more than 10 years, or until the age of 60 at most.
Arfat noted that early retirement at 50 or 55 years old is often accompanied by a salary reduction, which means the deduction rate can exceed 50%. This forces banks to restructure the loan to reduce the deduction to the 30% limit set by the Central Bank, which exposes the banks to significant losses due to the extended period and the write-off of a large portion of the profit or interest. Therefore, banks prefer to lend to younger clients or private sector employees who can stay in their jobs until the age of 65, or to citizen-business owners.
He added that banks consider the client's years of service in a government entity when applying for a loan. For example, if it is 23, 25, or 27 years, this raises concerns about approaching retirement, a reduction in the deduction rate, and sometimes extending the period beyond 70 years, in addition to writing off part of the interest.
Arfat confirmed that the Central Bank's laws regarding age limits are clear, and nevertheless, there are currently two banks in the country that provide financing to citizens and residents up to the age of 70, advising early planning for a loan.
On the other hand, banking expert Sheikha Ali stated that it is in the banks' interest to provide loans, especially mortgage ones, as they are guaranteed to some extent by the mortgaged property. However, many citizens prefer early retirement, so it is better to plan for a loan at a young age rather than waiting for the last 10 years of service, as this is better in terms of the period and installment value.
She added that for citizens planning to retire and who have their own business, it is better to take the loan in the name of their company or business, which can extend the period to 70 years without problems. As for non-citizens working in the government sector, this category sometimes leaves their job for any reason or leaves the country, she noted. Banks have risk management departments and internal control, in addition to being supervised by the Central Bank, which makes it necessary to study each case individually to protect the bank's interests before approving a loan.
Ali pointed out that some banks offer flexibility and facilitation in providing financing as long as sufficient guarantees are provided, stressing that clients should inquire and confirm what suits them given the large number of banks.
