It goes without saying that property in Dubai is expensive. Even if you’re looking at housing units in low-cost areas, be prepared to spend a fortune to own one. Since not many have this much cash available at their disposal to make such a huge payment, a lot of people rely on getting a home mortgage loan in Dubai to turn their dream of owning a home into a reality.
Of course, it has a downside that you’ll have to pay interest, but there are numerous benefits associated as well. The best out of them is that you’ll be able to own a property, which, otherwise, can be hard, taking into account the rising prices of properties in the emirate.
Keeping the cash vs mortgage debate aside, making the decision to take the plunge and owning a property in Dubai deserves a pat on your back. Having said that, if you’re opting for the mortgage option, bear in mind that the process to get it approved entails numerous steps. Furthermore, the applicant has to meet eligibility criteria so that their application can be processed. All this and much more about home mortgage loans in Dubai is discussed in detail in this post. Continue reading to know more!
Eligibility Criteria for Home Mortgage Loan in Dubai
Before applying for the mortgage loan in Dubai, make sure that you qualify for the loan. This step is necessary whether you want to buy residential or commercial property in Dubai.
Generally, the eligibility criteria vary from bank to bank, depending on their policies. Other financial institutes (private lenders) also have their own set of conditions that the lender must meet to get their application approved for a mortgage loan in Dubai. However, the general conditions are:
- The applicant must be UAE national or resident
- Their age should be between 21 and 65 years
- They must have a monthly income of AED 15000. If they are self-employed, it should be AED 25000 minimum.
There can be flexibility pertaining to the last condition as some banks and lenders also facilitate applicants having a low salary as compared to above-specified. Furthermore, not all banks and lenders offer home mortgage loans in Dubai to expats. Therefore, they only have a limited number of choices at their disposal for home loan pre-approval in Dubai.
Other than the aforementioned requirements, there can be additional conditions such as the minimum serving period for a job or being in the emirate for a particular duration etc. Banks and lenders also consider checking the credit score of the applicant before granting their applicant.
Documents Required for Mortgage Loan in Dubai
An important part of applying for a home mortgage loan in Dubai is submitting the required documents. Again, the documents required may vary, depending on the bank or lender you have applied for the loan from. However, mostly these documents are required:
- Passport photocopy
- Visa photocopy
- Emirates ID copy
- Proof of employment such as salary certificate
- A salary certificate for proof of employment
- Bank statement and salary slips for the preceding six months
- DEWA bill or tenancy contract as a proof of residence.
- Latest credit card statements
Types of Mortgages in Dubai
There are different types of mortgages available in Dubai. So, know about each of them before applying for a loan and select the one that suits you.
The major types of home loan mortgage available are:
- Capital and Interest Repayments
- Interest-Only Repayments
- Mortgage Life Insurance
- Fixed-Rate Mortgage Payments
- Variable Interest Mortgage Payments
You can find the details about these types of mortgages available in Dubai here.
Steps to Buy a Property in Dubai with Financing
Here are some of the major steps you should follow to buy a home in Dubai with financing option:
Finalise a Lender
To begin with, you need to finalise a lender. It can be a bank or a private lending company. For this, make a list of the best banks for mortgages or lenders, based upon your research or recommendations you have gotten from your friends or peers. Then, compare their mortgage rates and requirements to make an informed decision.
If you are new to Dubai and do not have enough information on banks and lending companies, you can hire the services of a broker. They have invaluable knowledge and insight, which they can use to provide you with favourable home loan mortgage deals offered by top financial institutes in the region.
Important Note: Never deal with a lending company that hasn’t obtained the necessary license. Banks must be registered with DLD. Similarly, if you’re hiring a broker, do it after thorough research and deliberation. This is an important detail you must pay attention to avoid landing in a troublesome situation in the long run.
Select the Type of Mortgage
As stated above, there are different types of home mortgage loans in Dubai. They differ in terms of interest rate, repayment terms etc. Do some research on your end and then decide accordingly. Take numerous factors into consideration when making this decision. These include the amount of loan, duration, monthly income, etc.
You can also take help of online mortgage calculators available on the websites of many banks. This feature can help you to get an estimate about the monthly instalment you will have to pay for the repayment of the loan.
Obtain a Pre-Approval Letter
One of the most important steps to obtain a home loan is getting the pre-approval letter. After receiving this letter, the borrower can start looking for suitable housing options.
It is basically an official document that is issued by the lender or bank. This document can also serve as evidence of the borrower’s eligibility. The maximum borrowing limit is also mentioned in the pre-approval letter.
The time it takes to get an approval letter depends on the bank/lending company you have selected. Usually, it is available in 3 to 5 working days. However, some companies also facilitate quick mortgage approval.
Finalise the Property
Now that you have the pre-approval and the maximum budget limit, you can start your hunt for the right property. Decide the location and type of property and then base your search on these factors. Keep in mind that the pre-approval letter is valid for 60 to 90 days. This duration depends on the lender you have selected. So, you will have to find a property in this tenure only.
Some people select a property before the mortgage approval. This isn’t exactly a wrong practice but can pose problems if the selected property doesn’t fall under the budget bracket for which the loan is approved. In such a case, you will have to redo the entire property hunt process again, which can consume a lot of your time. Thus, the best practice is to find a property after you have gotten the official approval.
Seal the Deal
This is the final step of obtaining the loan and getting ownership of your selected home. Once you have found the property, contact the lender/bank for the purpose of finalising the loan agreement. They may hire a property evaluator who will be responsible to know the value of the property you have selected.
If everything goes right, the lending company will release the loan amount, and you will own the property as it will be transferred to your name. You can also contact your bank for home insurance in Dubai for enhanced satisfaction and peace of mind.
Down Payment Required for Financing a Property
It is important to note that when buying a property on a financing option, you would still need a certain amount of cash to be deposited upfront as a down payment. The amount of down payment required varies for UAE nationals and expats.
- For properties up to AED 5 million, UAE nationals are required to make 15% of the total value of the property as a down payment. The rest can be financed by the bank/lender. However, if the value of the selected property is more than AED 5 million, the loan to value ratio (LTV) increases to 30%
- For expats, the LTV for their first property (up to AED million) is 20%. In case, the value of the property exceeds AED million, they will have to deposit 30% of the total price as a down payment. If it is their second or any subsequent purchase, the amount to be deposited upfront increases to 40%.
- When it comes to off-plan projects, the required down payment for expats is 50% regardless of the total price of the property.
The process to obtain a mortgage loan approval is straightforward. However, a small mistake on your part can lead to unnecessary delays. So, pay attention to each and every factor and take your time so that you can make a well-informed decision.