If you plan on staying in Dubai for a longer amount of time, buying a property rather than renting may be a better option. Properties here are lavish, offer an upscale lifestyle and are also considered good for investment purposes. As a matter of fact, Dubai is one of the few worldwide locations that offers a respectable return on investment through rental yields.

Having said that, for most people, purchasing a home entirely with liquid assets or personal savings is not an option, and they must rely on a mortgage to complete the process. Hence, you should be aware of the many types of home mortgage loans available in Dubai and the actions required to obtain one. The good news is that this is doable for an expat. 

The mortgage lenders are well-equipped to deal with foreign residents and non-resident mortgage applications, whether you’re searching for a new family home or an investment. You’ll need to get financing to finalise the transaction if you’ve decided to buy property in Dubai. 

Things to Keep in Mind When Financing Property in Dubai

Following are some of the things you should look out for when financing your property in Dubai:

Mortgage Eligibility Criteria

It is critical to first comprehend the mortgage eligibility conditions as laid out by the United Arab Emirates Central Bank. 

For UAE Citizens

If the property’s worth is AED 5 million and below, then the maximum loan amount is 80% of the value of the property. Similarly, if it’s above AED 5 million, then it will be 70%. 

However, if you are buying your second property, then the maximum amount will be 65% of the value of the property.

For Foreign Citizens

If the property is valued at AED 5 million or below, then you can only borrow a maximum amount of 75% of the value of the property. Whereas, if you go above the 5 million mark, the maximum you can borrow is 65%. 

Lastly, on the purchase of a second property, the amount you can borrow is 60% and it is applicable only to ready-made properties.

Mortgage Affordability Criteria

Some factors are taken into consideration before you are eligible for a home loan mortgage when you intend to finance your property in Dubai. Here are they:

  • Your monthly income
  • Status of your employment, whether you are a salaried employee or self-employed
  • The value of the property
  • Age
  • According to UAE Central Bank regulations, no more than 50% of your entire income should be used to settle debts such as mortgages, credit cards, and loans. This is known as your Debt Burden Ratio (DBR)
  • Lifestyle, for instance: Your living expenses, number of dependants
  • Your credit score

Debt-Burden-Ratio

It all boils down to what the bank deems you can easily afford at the end of the day. In the UAE, the banks use the Debt-Burden-Ratio (DBR) to determine how much they can borrow. 

Your DBR is the ratio of your monthly indebtedness to your monthly income. To account for prospective interest rate hikes, the bank will apply a little higher interest rate when calculating your future mortgage repayments. 

The calculation used by each bank to determine affordability varies slightly. However, your monthly income must be at least four times higher than the estimated monthly payments.

Types of Mortgages

As a foreign citizen who is looking to finance his property in Dubai can apply for a mortgage for either a primary residence or an investment property. 

The deposit amount you are asked to pay can vary depending on your circumstances and the exact property you want to buy. The first decision you must make is whether you prefer a fixed or variable rate package.

Following are some of the types of mortgages available:

  • Fixed Rate Mortgages
  • Variable Rate Mortgages
  • Discounted Rate Mortgages
  • Offset Mortgages

The Process for Mortgage

To get a mortgage for your property in Dubai, you should follow the below steps:

  • Select a mortgage type that meets your requirements.
  • Provide the appropriate papers to obtain a financial pre-approval. Your bank will send you a letter verifying the amount of money they are willing to offer you.
  • Find a property that fits your budget and reach an agreement with the seller on a purchase price. You can explore listings of latest properties for sale at Zoom Property using our advanced filters.
  • To secure the transaction, pay a deposit and choose a completion date.
  • Moreover, provide any further evidence required to confirm your mortgage.

Should you Consult a Mortgage Broker?

You can hire a broker to assist you with your mortgage application. There will be some brokerage fees payable on your behalf, but he will ensure that they handle your transaction from beginning to end, sourcing the finest solution for you.

It may be a good idea to seek expert assistance from a certified mortgage broker in some situations, such as when you are unclear about your eligibility for a mortgage. This is crucial if you are new to the Dubai mortgage market and are unfamiliar with all of the available alternatives and restrictions.

What about Down Payment?

Expats should demonstrate their capacity to cover additional one-time upfront expenditures of around 7-8 percent of the property’s value in addition to the minimum down payment required to acquire a mortgage.

Some banks will let you add a portion of the upfront purchase price to your mortgage, allowing you to put more money toward your down payment. As a result, you’ll be able to afford a more expensive home.

If you put all of your savings into financing your property, you may find it difficult to make your mortgage payments at first. Some banks will let you delay your payments for up to six months, allowing you to reorganise your circumstances before your payments begin.

Wrap Up

Financing a house is a big step, and it can be even more daunting when you’re doing so in a foreign nation. 

Many expats have made Dubai their home by purchasing a property in Dubai or a family home. As a result, the local financial services sector is used to dealing with foreigners, and if you’re in a good financial situation, you should be able to secure a mortgage easily.

Follow Us