Guide To Mortgages In Dubai: Process, Types and Eligibility

The process of buying and refinancing property in Dubai and the UAE can be a daunting and intricate journey. The dynamic nature of the real estate market and coupled with the diverse cultural landscape adds further layers of intricacy. So, before considering real estate investment or beginning your search for your new home, it is essential to understand the mechanics of mortgages in the UAE and home loan interest rates in Dubai For Expats.

You can buy a property in Dubai with cash or on a mortgage. Cash investment is deemed cost-effective. However, not everyone is able to buy or purchase a property via cash. So, many people choose the second option and seek mortgage loans. This option offers flexibility in managing finances.

Mortgages In Dubai And The UAE:

The United Arab Emirates has become one of the most sought-after investment destinations for expatriates mainly because of the unprecedented development and progress of Dubai and Abu Dhabi. The state-of-the-art infrastructure, favorable business environment, and the availability of high-end facilities and amenities attract professionals and entrepreneurs from all around the world.

Given this development, mortgage companies in Dubai and the UAE have established their strong presence to cater to the needs of both local; and international lenders. Mortgages in Dubai for non-residents are available for both residential and buy-to-let properties. No matter whether you want to buy a home or purchase for investment purposes, you can apply for a mortgage.

Who Can Get A Mortgage In Dubai And The UAE?

Both locals and expatriate residents can get a mortgage in Dubai, UAE. However, if someone is looking for a mortgage, he will have to meet certain criteria. 

• First of all, your credit history must be clean when applying for a mortgage. Check your credit documents before applying for a loan. A poor report may lead to rejection. That’s why, one must clean credit history
• If you are working in a company for at least six months or a year based on a specific area then you can apply for a property loan
• Self-employed people who are seeking a mortgage will need to have been running their businesses for at least two years
• People who work in specific companies such as government departments, banking institutions, or multi-national companies normally do not face any issue or hurdle in this regard
• You may also struggle if you are working in a small company or your employer is less established

Understanding The Types Of Mortgage In Dubai:

There are two main types of mortgages in Dubai for residents and expatriates.: Fixed-rate mortgage and variable-rate mortgage.

Fixed-rate Mortgage

In this specific type of property loan, the interest rate remains the same for a set period. It can be a year or 5 years. This type of loan has a pre-set interest rate that remains the same for a specific period.

Variable-rate Mortgage

The interest rate in this type of loan depends on the fluctuations in Emirates Interbank Offered Rates (EIBOR). This type of interest offers flexibility especially if interest rates are expected to increase. 

Note: Normally, mortgage terms are set for 25 years and one has to repay the loan before reaching the age of 70.

Eligibility To Get Mortgage Loan In Dubai:

• You are a UAE national or resident. It means local people and expats who have been working and living in Dubai for a specific time
• Your age must be between 21 and 65
• The monthly income of salaried people must be AED 15k and for self-employed, it is AED 25k
• The criteria for monthly salary may vary. Some financial institutions may give expansion to the UAE nationals as they can get a mortgage if they earn AED 10k/month.

Required Documents To Get A Property Loan In Dubai, UAE:

Applicants need the following documents to apply for a mortgage in Dubai

• A copy of the visa and passport
• A copy of the Emirates ID
• Proof of employment
• Proof of residence
• Pay slips and bank statements
• Credit card statement

Foreign nationals will also require a copy of their passport and bank statement for the past three months

Mortgage Agreement In Principle:

Before applying, one should go for an agreement in principle. Basically, it is the approval for a loan in advance. The bank issues a letter of approval for your loan before choosing a property. 

Here Is How To Apply For A Mortgage:

In order to apply for a property loan, one can seek the services of a mortgage broker in Dubai or apply directly. However, if you are a foreigner then you should get the services of a professional to deal with loan application matters and manage the loan for you. A mortgage broker knows about the best mortgage companies in Dubai and he can easily walk you through this complicated process of getting a mortgage loan.

Step 1: The first step is finding a lender. You may find a number of lenders in the UAE. You can directly approach a lender or bank or can also hire a broker to work on your behalf in order to get the best available option. We suggest you hire a broker because a professional has invaluable market insights, information and knowledge of the market.

Step 2: After choosing a lender, you now need to choose the most suitable property loan option based on the type of property you want to purchase, the amount you need, your income and your cash deposit amount. Based on these factors, you can choose a fixed-rate or variable-rate mortgage loan that suits you the best.

Step 3: Following that, you need to get a Dubai mortgage pre-approval letter. It is an official document that serves as evidence of your eligibility for a mortgage loan. A bank issues this letter which generally states about your maximum borrowing limit.

Step 4: Now, it is time to seek your desired property. A pre-approval letter is generally valid for 60 to 90 days. During this tenure, you are required to find a perfect investment option to get loan payments. Some people select a property in advance and then go towards the loan process. It might suit you some but normally it is not suggested. If you find a property within the stipulated duration then you should contact your bank to finalize this agreement. Once you and the seller decide the price then the bank will pay your deposit.

What Is The Mortgage Cost In The UAE?

The mortgage cost may vary because of a few factors such as the loan, amount, interest rates, term length, etc. Generally, a person has to pay a fee of 0.25% of the total amount to register the mortgage. A person may also have to pay the valuation fee and mortgage protection insurance.

How Much Can You Borrow For A UAE Mortgage?

Basically, there are limits in the UAE on how much you can borrow. Normally, the total borrowing amount should not exceed what you expect to earn for the next seven years. In simple terms, a mortgage payment cannot be more than 50% of your monthly income.

Mortgage Lenders In The UAE For Expats:

Not every lender offers a loan to non-nationals in Dubai. Lenders such as Emirates NBD, HSBC and Mashreq are deemed expat-friendly lenders in Dubai. 

Mortgage Rates In The UAE:

Mainly, mortgage rates in the UAE depend on a few factors such as property type, lender and financial conditions of the mortgage seeker. The range of mortgage rates normally varies mainly because of the above-mentioned factors. It may range somewhere between 2 to 5%. Notably, this is a general figure, not a decisive one. 

Mortgage Repayment In The UAE:

Mortgage Repayment involves paying a decided portion of payments to the lender. The exact amount depends on the loan amount, interest rate and term length. This repayment consists of both principal amount and interest.

Refinancing The Mortgage In The UAE:

It involves replacing your current mortgage with a new one. A mortgage is typically refinanced to obtain better terms such as a lower interest rate, extended repayment period, or move from a variable to a fixed-rate property loan. This consideration is quite helpful in reducing the overall cost of a loan. One must consider terms and conditions and the associated fees before going for this option.

Final Thought:

The United Arab Emirates, especially Dubai and Abu Dhabi attract foreign nationals mainly because of the business-friendly environment, high-end offerings and amicable living environment. Local and foreign investors require mortgage loans to buy homes or buy-to-let properties. Several best mortgage lenders in Dubai offer property loans to both nationals and expats. There is an eligibility criteria and one needs to fulfill that standards in order to get a loan.

You can get a fixed-rate or variable-rate mortgage based on your specific needs and approach. Understanding the home loan interest rate in Dubai for expats is essential to make an informed decision. Though you can apply for a loan on your own. However, you should get the services of a mortgage broker in Dubai.

Seek Our Guidance:

Kelt and Co Realty is a real estate agency that operates in Dubai. This real estate company facilitates people in buying and selling real estate in Dubai. People who intend to invest in the real estate sector in Dubai should get its assistance in order to make profitable decisions and earn high ROI. Its professionals are always there to assist local and foreign investors.

FAQs