It is not necessary for one to be a real estate tycoon to start the process of buying a house; however, one does need some key information about the home-buying process.
Buying a house can be a daunting prospect. Many people have spent their lives renting, so when they decide to take the step up to owning property (and spending all of the money that they have so diligently been saving), they are often not quite as prepared as they should be. This could lead to a slew of costly errors.
So, in this article, a number of tips have been put together that need to be kept in mind when purchasing property in Dubai.
Assessing what one can afford
One of the most crucial steps involved in the process of buying a house is having a good understanding of the ultimate cost. Aside from the mortgage, there are numerous fees associated with purchasing a home. Insurance, repairs, association fees, and property taxes. This means that you should have the income and budget to handle all of these things if they are relevant to your purchase.
Legalities of buying a house in Dubai
The Dubai property market is different from that of other countries in the world. This means that you need to make sure that you have a Dubai real estate agent who you trust for guidance through the process. This is crucial.
- Tenure - How long have you been a resident of Dubai, and how long do you plan to call the city home? The responses to these questions are extremely important in estimating your potential return on investment in the Dubai property market. If you are not sure of your long-term plans or commitment to the region, renting as opposed to buying a house may be more suitable for you.
- Affordability - A global norm, which helps to define affordability when buying a house, is that your monthly housing expenses should not be more than 30% of your salary, yet UAE lenders will allow up to 50% of your income to be put towards a mortgage payment. When purchasing property in Dubai, it is also crucial to budget for upfront fees. These can be estimated at between approximately 7 and 8% of the purchase price. As an owner, you will also have to keep up with ongoing maintenance fees as well as paying the annual service fees.
Options for homeowners in Dubai
The opportunity for foreigners to purchase property in Dubai opened up in 2002. Since then, it has attracted many expats and overseas buyers looking to take advantage of secure regional investment. Therefore, advice about how to buy a house was needed.
The number of units available to foreigners looking to buy property in Dubai has grown significantly over time, with an abundance of apartments, villas, and townhouses currently on the market.
- Freehold - Overseas investors and non-UAE national expat residents are able to purchase property in freehold areas, which are spread out across the emirate.
- Leasehold - There are also several leasehold areas alongside the freehold regions that expats can invest in. The term "leasehold" essentially gives one 99-year ownership of the house, with the land owned partially by you and partially by the freeholder who has leased the property to you.
Choose your location
As one of the fastest growing cities in the world, Dubai has scenic water views and skyscrapers in addition to idyllic spots for quiet reflection. Before beginning your search for Dubai property, it is essential to understand the Dubai property market, the different locales available, and the factors that make it one of the world's most exciting markets for buying a house.
Off-Plan
Off-plan or under-construction units are popular among some investors. In addition, these types of units tend to have good price appreciation. However, there is a level of risk involved as the property might not be completed or might take longer to complete than planned.
Recent off-plan projects are in the following areas:
- Downtown Dubai
- Town Square
- Emaar Beachfront
Developed
Buying a house that is already built may come with its own set of risks. The plus side is that you can inspect the property and be sure of what you are buying.
Some of the most popular areas in Dubai right now are:
- Dubai Hills
- Dubai Marina
- Emirates Living
Affordable
International City and Dubai Production City (IMPZ) are two of the cheapest areas in which you are able to buy an apartment in Dubai. Also, there are a number of cheap townhouses for sale in Dubai in areas such as Serena as well as Town Square.
Purchasing villas in Dubai is an excellent option for those seeking a more integrated community lifestyle. Serena is a good option for buying a villa, while other communities for buying villas are Reem by Emaar and Akoya Oxygen.
Conduct a price comparison
Estimating the value of property in Dubai is a necessary step in learning how to buy a house. This is for a variety of reasons, such as financing, sales listing, investment analysis, and property insurance. But for most people, establishing the asking or purchase price of a piece of real estate is the most helpful application of real estate valuation and buying property.
Don't hesitate to reach out if you need assistance with the financing to purchase property in Dubai.
A plan to fund your down payment
The UAE Mortgage Cap law requires non-UAE nationals who are buying a house in Dubai or one of the other emirates to have a cash down payment of at least 20% of the property value.
Mortgage pre-approval
The mortgage pre-approval process takes approximately three to five working days for employed applicants after the bank is satisfied with the documentation provided. For self-employed applicants who are wishing to buy a house, the mortgage pre-approval process takes approximately 10 working days after the bank is satisfied with the documentation provided.
For purchasing property in Dubai, pre-approval validity periods differ between 30 and 90 days. This is dependent on the bank. Revalidation of expired pre-approvals is possible, subject to product availability as well as updated documents.
A mortgage pre-approval is a guarantee of financing subject to meeting the bank's terms and conditions and providing the applicants profile and circumstances do not change prior to the disbursal of the mortgage. The exact amount of financing is dependent on the UAE Central Bank's maximum loan-to-value limits and the property valuation.
Mortgage categories in the UAE
The first step in finding the right bank for a mortgage loan is knowing what type of mortgage you want for buying a house as well as which types are available in the UAE that suit your needs.
In providing assistance to people regarding how to buy a house, financial institutions provide various types of mortgages. Borrowers choose one based on their preference as well as eligibility.
UAE National
The following mortgages are available to UAE nationals:
- Fixed Rate Mortgage
- Variable Interest Rates
- Offset Mortgage
Expat
Expat buyers can get a mortgage in the United Arab Emirates, but they need to meet certain criteria. You will need to have been in your current job ideally for at least six months depending on the area you are buying and your lender's rules.
Non-resident
The process is quite easy for a non-resident to get a mortgage in the UAE. If you are a non-resident wanting to get a mortgage in Dubai, Abu Dhabi, or another Emirate, you will need three months of bank statements that demonstrate affordability and a copy of your passport.
Budget
It is extremely important to determine how buying a house will affect your monthly budget before you purchase a home, not afterward. One of the biggest mistakes people make financially is house hunting and then falling in love with a home before they have analyzed their monthly budget and seen if they can afford monthly repayments as well as other related costs.
Property purchasing costs to keep in mind
When purchasing a property in Dubai, it is important to look beyond just the purchase price when determining what it actually costs to buy a house. There are a number of obvious and not so obvious costs that should be factored into the equation when preparing your budget.
Purchase price
The Dubai Land Department (DLD) charges 4% of the sales price as transfer fees plus a knowledge fee of AED 430 for a plot, AED 40 for off-plan property, and AED 580 for apartments and offices.
Registration fees
A Registration Trustee Appointment fee needs to be paid in cash and costs AED 4,000 for already-built units and AED 5,000 for off-plan units.
The property registration fee is AED 2,000 plus 5% VAT for properties valued less than AED 500,000. For properties valued above AED 500,000, the property registration fee is AED 4,000 plus 5% VAT.
Valuation fees
Property valuation fees range from AED 2 500 to AED 3 500, plus 5% VAT.
Loan processing fees
Loan processing fees are 0 - 1% of the loan amount plus 5% VAT.
Mortgage registration
The DLD charges a mortgage registration fee of 0.25% of the loan amount plus AED 290. It's also very important to keep in mind that when purchasing a property where the seller has a mortgage registered, the buyer will first need to pay out the sellers mortgage in order to receive a No Objection Certificate (NOC). This is so that the property transfer can be processed with the DLD. The NOC, which is a legal certificate, states that the seller has paid all service charges and other fees and that the developer has no objection to the sale.
Home insurance
Home insurance is compulsory in Dubai. Home and contents insurance offers protection from potential loss or damage due to theft, accidents, fires, or natural disasters.
Property inspection policy in Dubai, UAE
At the end of the property buying process and before taking possession of your new home, you will, of course, want to conduct a thorough inspection of the property to ensure that there are no major flaws or maintenance issues.
Before signing any handover paperwork, you should conduct a property inspection and snagging report. This is because getting any repairs or amendments made after this will be difficult and may involve a lot of follow-up calls and emails.
Need assistance with financing and buying a home in the UAE?
If you need assistance with financing and purchasing a property in Dubai, contact Holo in order to see how we can help.
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.