Have you finally decided to own a property after spending years as a tenant in one of the UAE’s prestigious emirates? Regardless of how pleasant it looks from the outside, purchasing a property in the UAE can be a hassle with all the property research and decision-making. But, once you’ve made up your mind, there’s no going back but to align your finances. 

Beginners often find the latter part overwhelmingly daunting, causing some to jump into the mortgage blindly.

So, before you get all excited and start looking for properties for sale in UAE, you must know about the basics of UAE mortgage law. And for this, we have got you covered. Here’s an all-inclusive guide pertaining to mortgage law in the UAE:

UAE Mortgage Law – A Brief Introduction

At the end of October 2013, the Central Bank of the UAE provided a new set of rules to banks and other financial institutions on mortgage lending. The laws clarified that the Central Bank aims to ensure that all the banks and finance companies providing mortgage loans must abide by the frameworks. However, these policies kept on upgrading after every few years. 

What Does UAE Mortgage Law Include?

The UAE mortgage lawcame to effect in 2019 after facing a few amendments in the older version. As per the law, buyers must comply with the following orders:

Registration for Mortgage

Article 7 states that a mortgage is only valid when registered with the department. Also, the mortgage, otherwise known as the property owner, shall bear the cost of the agreement unless the other party agrees. 

Mortgage Application for RERA

The law outlines all the involved participants in the Mortgage Application for RERA to get it registered legally.

Legalities of the Mortgage

Article 10-20 states the rights and restrictions for the mortgagee and mortgagor during the entire mortgage period. Since the UAE is quite conscious regarding its citizen’s rights, the authorities will take strict actions in case of any mishap from either party.

Default in Payments 

From Articles 25 to 30, you’ll see clear outlines of how a mortgagee might commence proceedings against a mortgage if he shows defaults in making the payments. After all the penalty procedures and notice periods have been made, the UAE mortgage law calls for a public property auction.

Types of Interest Rates on Mortgages 

There are two kinds of mortgages in terms of interest rates, which are as follows. 

Fixed Mortgage Rates

Fixed mortgage rates, as the name suggests, showcase a fixed interest rate for the mortgage amount. The rate is determined before signing the mortgage offer letter for a period of a few years. However, some lenders might demand a fixed interest rate for the entire period of the loan. Fixed interest rate arrives with the following perks. 

  • Home buyers will have a clear budget since there won’t be any additional mortgage rates for the loan period. 
  • Dealing with a fixed interest rate saves you from financial crises in case mortgage rates rise. 
  • The mortgage rate buyer pays a fixed amount every month, which doesn’t disturb your other finances.

Variable Mortgage Rates 

The variable mortgage rate is that type which is totally dependent on market factors. The more fluctuation the mortgage market experiences, the more rates will vary accordingly. That said, the interest rate can stabilise or decrease during a variable mortgage regime.

Since you’re backed up financially, you can tackle the changing mortgage rates. This type of interest can help you in various ways, which are

  • It’s easy to qualify for a variable mortgage rate basis because only a handful of property purchasers opt for it. 
  • Home buyers can lay their hands on a more expensive property because the initial payments are lower.
  • Although it’s uncertain, market fluctuations can’t necessarily happen. So, with no inflation imbalances, you can enjoy financial stability all year round.

Documents Required To Get a Mortgage in the UAE

Identification is of pivotal importance for getting any type of loan in the UAE. According to UAE mortgage law, these are the documents you’ll need.   

  • Documents proving your residence in the country with an accurate address and clarifications of your current whereabouts. 
  • A financial document is vital as evidence of your current financial status, including salary details, tax returns and other side earnings. 
  • A copy of your passport. 

Step-by-Step Guide to UAE Mortgage Loan

Following this short step-by-step guide, you’ll achieve a mortgage loan in the UAE.

Step # 1- Decide whether you want to approach a bank directly or a financial broker/ agent.

Step # 2- You need to confirm which mortgage rate will suit you, whether it’s the fixed interest rate or the variable one.

Step # 3Get an Agreement of Principle issued from the mortgagor providing you with the loan.

Step # 4- Find your dream residence and make an offer to the seller.

Step # 5- At this point, both parties will mutually reach a decision. Next, submit your deposit to confirm the deal and get a completion date from the bank. 

Step # 6- The mortgager will release the fund to the mortgagee on completion. 

Mortgage Costs in the UAE

When buying property in Dubai or any other emirate, you must acknowledge the mortgage cost, apart from the property investment. Bear in mind that this cost is inescapable and makes it a mandatory part of the UAE mortgage law.

When requesting a mortgage in one of the UAE emirates, you’ll need to pay 0.25% of the entire investment to register the loan. The lender might also charge you a valuation fee and mortgage protection insurance.

Wrap Up

Over the years, the real estate market of the UAE has gained remarkable progression. Therefore, investors and homebuyers are availing the mortgage policies to get the ideal properties. However, before you proceed, make sure to go through this in-depth UAE mortgage law guide to make an informed decision.

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