With its dynamic lifestyle, robust economy, and reputation as a global business hub, Dubai attracts investors and expatriates from all over the world. Purchasing property here is a significant step, and understanding the mortgage process can make this journey smoother. Here’s a comprehensive guide on how to obtain a mortgage in Dubai, whether you’re a resident or non-resident.
Types of Mortgages in Dubai
In Dubai, the most common types of mortgages include:
- Fixed-Rate Mortgage: The interest rate remains constant for a specified period, usually 1-5 years, allowing for predictable payments.
- Variable-Rate Mortgage: The interest rate fluctuates based on the market rate, which can impact monthly payments.
- Islamic Mortgage (Ijara and Murabaha): Compliant with Sharia law, where the bank purchases the property and leases it to the buyer, who pays back through monthly instalments.
Your choice will depend on factors such as financial stability, long-term plans, and market trends.
Eligibility Requirements
While exact criteria vary across banks, the general requirements include:
For Residents:
- Age: Applicants should typically be between 21 and 65 years old.
- Income: A minimum monthly income of AED 15,000 to AED 20,000 is usually required, though this varies.
- Employment Stability: Most lenders look for at least six months of stable employment.
- Credit History: Banks will assess your credit report to understand your debt repayment history.
Non-residents face stricter requirements:
- Higher Down Payments: Non-residents are often required to pay a higher deposit, typically 25% to 40% of the property value.
- Limited Loan-to-Value (LTV): Loan-to-Value ratios are lower for non-residents, often capped around 60-70%.
- Proof of Income: Foreign income sources may be harder to verify, requiring more documentation.
Understanding Loan-to-Value Ratios (LTV)
In Dubai, the maximum LTV is regulated based on residency status and property value:
- For First-Time Buyers (Residents): Up to 80% LTV on properties valued under AED 5 million.
- For Expats: Typically, 75% for properties under AED 5 million.
- For Non-Residents: Maximum LTV is often limited to around 60-70%.
Higher down payments are required for properties valued above AED 5 million or for additional property purchases.
Mortgage Application Process
Step 1: Pre-Approval
Before beginning your property search, obtain pre-approval from your chosen bank. Pre-approval assesses your finances and helps determine your borrowing limit, which makes the process smoother once you find a property.
Step 2: Property Selection
Once pre-approved, you can choose a property. Whether through a real estate agent or directly from the developer, ensure the property is approved by the Dubai Land Department (DLD) and complies with mortgage lender criteria.
Step 3: Final Approval
After selecting the property, your bank will complete the final approval. This involves verifying the property’s value and ensuring it aligns with the loan amount you’ve been pre-approved for.
Step 4: Property Valuation
The bank will assess the property’s value to confirm its compatibility with the mortgage. This process is necessary to finalise the loan agreement and prevent over-borrowing.
Step 5: Signing the Mortgage Agreement
Once valuation and approval are complete, the mortgage agreement is signed. You will pay an arrangement fee to the bank, typically 1% of the loan amount.
Step 6: Property Registration
To complete the purchase, register the property with the DLD. This includes paying the 4% registration fee and obtaining a title deed in your name.
Fees and Costs to Consider
A mortgage in Dubai involves several fees beyond the loan:
- Bank Arrangement Fee: 1% of the mortgage value.
- DLD Registration Fee: 4% of the property price.
- Property Valuation Fee: AED 2,500 to AED 3,500, depending on the property.
- Life and Property Insurance: Mandatory for mortgage approval.
Use our Mortgage Calculator to better understand what deposit you should put down and how much you are expected to pay each month.
Essential Tips for Getting a Mortgage in Dubai
Compare Lenders: Dubai has a variety of lenders offering different mortgage rates. Compare options to secure the best terms.
Budget for Fees: Ensure you have funds for DLD fees, down payments, and other associated costs.
Understand Currency Fluctuations: If you’re a non-resident, consider how currency changes could impact repayments.
Seek Professional Advice: Hiring a real estate advisor or mortgage consultant can ease the process, especially if you’re unfamiliar with the Dubai market.
