Whatever your reasons may be for looking for a property in the United Arab Emirates (UAE), understanding the types of available mortgages and the steps needed to get one set up are highly important.
Who is eligible to get a mortgage in the UAE?
You can apply for some different mortgages in Dubai if you are a UAE national or resident, aged between 21 and 65, and have a monthly income of AED 10k (salaried) or AED 25k (self-employed).
Some banks allow UAE nationals with a monthly income of at least AED 8k to apply for a mortgage in the UAE, but it is largely dependent on bank policies.
Non-residents can also explore mortgage options in the UAE. However, their choices are largely limited, as very few banks deal with home loans for non-resident property buyers.
Available types of mortgages in the UAE
If you are entering the real estate market in Dubai or any of the other Emirates, one of the most significant steps to keep in mind is financing your property investment.
The majority of people in the UAE turn to a mortgage in order to pay off their purchases. However, the process of applying for a mortgage in the UAE, as well as the laws and regulations related to it, can be quite intimidating if this is your first purchase.
So, below is everything that you need to know about mortgages in the UAE and the laws related to them.
- Fixed-Rate Mortgage - The interest rate on fixed-rate mortgages in Dubai is fixed in advance. In other words, before the start of the term of the loan. It remains the same throughout the time period for which the rate is set.
- Variable-Rate Mortgage - Unlike fixed-rate mortgages in Dubai, the mortgage interest rates in the UAE in terms of variable-rate mortgages are sensitive to change throughout the term of the mortgage loan. With a variable rate mortgage, the rate of interest will fluctuate throughout the term of the loan based on the market conditions in the UAE. The variable rates are related to the Central Bank of the UAE (CBUAE) and Eibor rates.
- Capped Mortgage - Capped mortgages are features of variable-rate mortgages. Within the variable-rate offer, a maximum cap is set prior to the term's beginning. If the market rates rise, the monthly installment will not rise beyond the predefined cap. Remember that capped mortgages are also valid for a limited time as an introductory offer.
- Offset Mortgage - An offset mortgage is a somewhat new concept in the UAE. Under an offset mortgage, loan holders can link their savings account, current account, credit card account, and loan account. Whenever some funds are credited to any of the accounts, the loan amount gets reduced by an offset of the credited amount.
How do you pick the right mortgage?
Choosing the right mortgage in the UAE is a big decision that can make a huge difference in your financial health. With so many options available, it can be challenging to figure out which mortgage best suits your needs, especially if you're a first-time buyer. There are a number of factors to take into account when choosing a mortgage in Dubai.
- Your lifestyle - Beyond the price of a home, you have to consider your cost of living, which refers to how much money you spend to cover basic living expenses, such as groceries, entertainment, gym membership, dining out, and so on. The cost of living is an important consideration when deciding how much house you can afford and where you want to live.
- The type of property you want to buy - Your mortgage payments will largely depend on your home's cost, which can vary depending on where you're looking to buy and what kind of place youbre looking for. Check out the UAE mortgage calculator to find out how much you will be able to spend on your home.
- Amount needed - Sometimes, people find their desired property in Dubai first and then apply for a mortgage in the UAE. It can work, but then you may not be able to secure the full amount of home financing that you need in order to purchase the property.
- Available cash deposit - If you're buying property with a mortgage in Dubai, the minimum cash down payment is determined based on the purchase value of the property as well as your resident status.
What are the required documents to get a mortgage in the UAE?
Anyone who wants to buy property on a mortgage in the UAE needs to first apply for one. Obviously, there is paperwork that is required in order to process a mortgage application in Dubai. The requirements may vary slightly from one bank to another; however, for the most part, you will need the following documents to apply for a mortgage in Dubai:
- ID - It is recommended to get a mortgage pre-approval before searching for a property so that you are in the strongest position to move ahead with an offer as soon as you see your dream home.
- Residency - You will need to supply proof of residence (a copy of the tenancy contract or DEWA bill).
- Bank statement - Your bank statements for the past six months will need to be submitted.
- Payslips - Payslips for the previous six months will be required during the mortgage application process in the UAE.
- Business documents - For business owners, the lenders will need to see a copy of the company registration documents along with copies of six months' worth of business bank statements.
Required income to receive a mortgage in the UAE
If you would like to purchase an apartment in Dubai or are more inclined towards buying a villa or townhouse, you can easily secure a mortgage loan for it, given you meet the eligibility criteria. You can apply for a mortgage in Dubai if you have a monthly income of AED 10k (salaried) or AED 25k (self-employed).
Mortgage rates in the UAE
As it is known to all, the UAE has become a global hub in terms of trade, tourism, and several other industries. It also has one of the most advanced financial and legal systems in the region, allowing residents and ex-pats to manage their finances in the most secure, transparent, and convenient way possible.
Where to start when applying for a mortgage in the UAE
In Dubai, home mortgages are provided through banks and mortgage lenders. These must be registered with the Dubai Land Department (DLD) in order to be legally valid. You are able to directly approach your bank for their available mortgage deals or, alternatively, you can use a registered mortgage broker who will have access to the whole lending market and potentially offer exclusive offers.
- Understand your affordability - In the UAE, the Central Bank sets guidelines as to how the affordability of a loan is calculated. The calculation takes all of the proveable income that the applicants earn into account. A total of 50% of this amount can be used towards the total liabilities in the UAE. This can be made up of any existing credit agreements plus the home loan that is being applied for. You can check the mortgage calculator here to work out your affordability for a loan.
- Assess your income - Your mortgage loan application in the UAE is more likely to be successful if you fully understand how you're spending your income and how the banks treat categories of expenditure differently.
- Research lenders - There are over 500 products available from 20+ lenders in the market, so finding the correct home loan can be tricky. If you want to have someone search multiple lenders for you and come up with the best loan option, working with a mortgage broker (such as Holo) might be your best bet.
- Get your paperwork together - You need to make sure that all of your paperwork is together before you start house hunting. Having this information available allows you to move quickly with an application to approve your home loan.
- Pre-Approval - Mortgage pre-approval is the first step in the mortgage process for buying a property. It occurs when the bank reviews your application and issues a letter or email that states that they have pre-approved you and will lend you the amount requested.
- Find your home - It's now time to find the perfect home. Pre-approval letters are generally valid for 60 to 90 days, depending on the lender. This gives you ample time to search for the property you wish to purchase.
Begin your mortgage application with a team of trusted mortgage advisors
If you want to begin your mortgage application process, choose Holo. We are a team of trusted mortgage advisors, and through our online application, we will guide you every step of the way.
This blog is for educational purposes, but everyone's case is unique, and local guidelines and regulations may change. Our mortgage advisors can help you with any question you may have and have the latest advice. Get in touch.