You can buy a property in Dubai, UAE in three ways: Fully paid or with a mortgage. Off-plan paid-in installments is another option. While a fully paid investment may be more cost-effective in the long run, a mortgage gives you more flexibility in how you manage your finances.
Before you start looking for your dream home, you should understand how mortgages work in the UAE. This guide contains the following information on the topic:
Key Highlights:
Essential Points Covered in Our Guide to Getting a Mortgage in Dubai, UAE:
- Understanding Mortgages in the United Arab Emirates
- Eligibility Criteria for Mortgage Applicants in the UAE
- Exploring Different Types of Mortgage Interest Rates in the UAE
- Determining Borrowing Limits for UAE Mortgages
- Step-by-Step Guide on How to Apply for a Mortgage in the UAE
- Importance of Mortgage Agreements in Principle
- Necessary Documentation for Obtaining a Mortgage in the UAE
- A Detailed Walkthrough of the Mortgage Application Process in the UAE
- Breakdown of Mortgage Costs in the UAE
- Insights into Property Insurance Requirements in the UAE
- Considerations for Life Insurance in Conjunction with UAE Mortgages
1. Understanding Mortgages in the United Arab Emirates
The UAE mortgage market has matured significantly, welcoming both local and international lenders. This robust market extends its offerings to UAE residents, non-residents, and expatriates alike. Foreign nationals residing in the UAE have access to a range of residential and buy-to-let mortgage options, albeit with varying eligibility criteria.
2. Eligibility Criteria for Mortgage Applicants in the UAE
In the UAE, securing a mortgage is within reach for almost anyone who can demonstrate a reliable income stream. Whether it’s from business ventures, salary earnings, commissions, or rental income, various income sources are considered eligible for mortgage applicants.
Who qualifies for a mortgage in the UAE?
- Employed UAE Residents
- Self-Employed Residents of the UAE
- Non-Resident Individuals Employed or Self-Employed in the UAE
- Age range is typically between 21 and 65
- Minimum monthly salary of AED 10,000 for employees and monthly self-employment income of AED 25,000 for self-employed individuals
It’s important to note that the minimum salary requirement for a home loan in Dubai can vary among banks. While some banks may accept applications from UAE nationals with a monthly income of at least AED 8,000, this criterion is subject to individual bank policies.
3. Exploring Different Types of Mortgage Interest Rates in the UAE
In the UAE, mortgages come with either fixed or variable interest rates. Fixed-rate terms typically last three to five years, though they can be as short as one year.
Current mortgage offers from lenders in the UAE often start with fixed interest rates for a specified period, transitioning to variable rates afterward.
Fixed-rate mortgages provide stability in repayment amounts for a set duration, making budgeting easier. On the other hand, variable rate mortgages may be advantageous if interest rates are expected to decrease. Mortgage terms are usually set at 25 years, with the loan requiring full repayment by the age of 70.
4. Determining Borrowing Limits for UAE Mortgages
According to the Central Bank of the UAE, the maximum mortgage you can obtain is determined by two main factors:
- The mortgage amount cannot exceed 7 times your annual income (i.e.84 months).
- Total liability repayments, including mortgage payments, car loans, personal loans, and credit card debts, must not exceed 50% of your salary.
5. Step-by-Step Guide on How to Apply for a Mortgage in the UAE
You can apply for a home loan directly through a bank or via a mortgage broker consultancy firm such as Aura Ventures Real Estate LLC.
Expat borrowers can significantly benefit from using a mortgage broker consultancy firm. For instance, Aura Ventures can navigate the complexities of the local market to secure the best mortgage deal tailored to your needs. Typically, mortgage applications in the UAE are processed within a few weeks.
6. Importance of Mortgage Agreements in Principle
Before submitting a full application, it’s beneficial to reach an agreement in principle. This involves the bank providing mortgage pre-approval for your loan before you find a property. This pre-approval allows you to make an offer on a home with the confidence that it fits within your budget.
7. Necessary Documentation for Obtaining a Mortgage in the UAE
The required documents will vary depending on your situation, but our mortgage broker consultancy can discuss the specifics with you.
In general, the following documents are required for your mortgage:
- Copy of your passport, visa, and Emirates ID
- Salary certificate addressed to the Bank
- The last six months’ payslips and bank statements
- Latest credit card statements
- Proof of your current address, such as a copy of a DEWA bill or tenancy contract
8. A Detailed Walkthrough of the Mortgage Application Process in the UAE
The primary steps to obtain a mortgage in Dubai, UAE, are:
- Decide whether to contact a bank directly or work through a mortgage broker consultancy.
- Research to find the best mortgage option for your needs.
- Obtain an agreement in principle from the bank and request a letter as proof.
- Make an offer on a suitable property within your budget.
- Pay your deposit to confirm the purchase and set a completion date once the price is agreed upon.
- The mortgage lender will release the funds to the seller on the completion date.
9. Breakdown of Mortgage Costs in the UAE
When purchasing a property in the UAE, you’ll encounter various costs, which might vary slightly based on the Emirate, whether it’s Dubai, Abu Dhabi, or another. Below is a breakdown of the typical fees in addition to the cash deposit (or down payment).
| Bank Arrangement Fee | 0 to 1.5%* of loan amount |
| Valuation Fee | 0 to 1.5%* of loan amount |
| Land Department Fee | 4%* of the purchase price plus AED 580 (Abu Dhabi 1%-2%) |
| Trustee Fee | AED 4,000* |
| Mortgage Registration Fee | 0.25%* of the mortgage borrowed plus AED 290 |
10. Insights into Property Insurance Requirements in the UAE
In the United Arab Emirates, building insurance is mandatory when obtaining a mortgage, while content insurance is optional. Insurance policies in the UAE are often affordable, offering the flexibility to purchase buildings and contents coverage separately or as a combined package.
The cost of insurance is typically determined by the value of your home and belongings. As a rule of thumb, the annual premium should be around 0.1% per month of the total property value and contents.
It’s important to note that property insurance requirements may vary based on lenders’ policies.
11. Considerations for Life Insurance in Conjunction with UAE Mortgages
Investing in Dubai properties can yield high returns due to the absence of property taxes. Expect returns of over 6%, with double-digit returns in key neighborhoods, making Dubai one of the top destinations for property market investment.
In Summary
Investing in property in Dubai, UAE is a savvy choice. Dubai’s allure as an investment destination is heightened by its low property taxes and expanding population. The visa program, coupled with attractive rental yields and affordable property prices, further enhance its appeal as an investment opportunity.
If you found this guide helpful or seek assistance from top mortgage advisors and mortgage deals in the UAE, reach out to our team of mortgage experts.