How to Get a Mortgage in Dubai: Everything You Need to Know

The UAE is a haven for property investors and aspiring homeowners alike, offering a diverse range of luxurious properties and thriving communities. But how do you navigate the mortgage process in this dynamic market? Worry not! We've got you covered with a comprehensive guide to getting a mortgage in Dubai that will aid you in securing the perfect home loan in UAE.

From understanding the mortgage in the UAE market and eligibility criteria to exploring repayment options and refinancing, we'll walk you through each step of the journey on how to get a mortgage in Dubai. Whether you're a UAE national, expat, or non-resident, this guide will equip you with essential knowledge to make informed decisions and turn your dream of owning a property in the UAE into reality.

Short Summary

• Can you get a mortgage in Dubai? We delve into the specific eligibility criteria for mortgages in the UAE.
• The UAE mortgage market offers a range of home loan options, with varying repayment terms and costs which are covered below.
• An outline of the the essential documents required to initiate the process effectively.
• The three instances where mortgages are involved within the property buying process will also be explained.

How Does Mortgage Work in Dubai?

The UAE mortgage market is well-established, offering a variety of home loans to cater to the diverse needs of UAE nationals, expats, and non-residents alike. With plenty of options for property purchases, it's no wonder that the UAE has become a popular destination for both local and foreign property buyers.

Understanding exactly how mortgage works in Dubai and navigating the financing landscape can be complex, as eligibility criteria and costs involved vary depending on factors like your residency status, property value, and monthly income. For instance, Dubai and Abu Dhabi have different fee structures with the Dubai Land Department and the municipality in Abu Dhabi charging different transfer fees. We will focus on Dubai for the purposes of this article.

A significant shift is on the horizon as property buyers, particularly end-users, are poised to increasingly favor mortgage financing. This shift is driven by optimistic expectations of a potential drop in interest rates. The evolving financial landscape suggests that if interest rates see a reduction, borrowers in the UAE may benefit from more attractive financing options.

As interest rates become more borrower-friendly, the UAE's mortgage market is likely to witness heightened demand for mortgage products, providing property buyers with an opportune moment to explore the benefits of mortgage financing and make the most of evolving market conditions. However, when considering the question of "can you get a mortgage in Dubai?" - it's important to monitor market trends and adapt your strategy accordingly.

Eligibility Criteria for Mortgages in UAE

When it comes to securing a mortgage in the UAE, several crucial factors come under the scrutiny of banks and financial institutions. These factors include the applicant's residency status, debt-to-income ratio, loan-to-value ratio, credit score, income level, and employment history. Upon further consideration, you may be left asking yourself "how does mortgage work in Dubai?" - Don't worry! we'll help you navigate through all that throughout this article.

Banks thoroughly asses the applicant's financial stability and creditworthiness to determine the risk associated with granting a mortgage in Dubai for expats. Additionally, factors like the applicant's age, the duration/tenure of the loan, and existing relationships with the bank also play a role in the approval process. To successfully navigate the mortgage application process in Dubai, understanding and meeting these criteria is essential to enhance the chances of approval and secure favorable mortgage terms.

Income requirements can vary among banks, but a minimum monthly income of AED 15,000 is a common benchmark for UAE nationals seeking home loans in Dubai. When looking at a mortgage for expats in Dubai, a down payment of at least 20% is mandatory for residential loans on properties valued up to AED 5 million. Beyond these basic criteria, financial institutions may also consider factors such as your current job, employer, and existing relationship with the bank.

Credit history is another significant aspect of mortgage eligibility in the UAE. A solid credit history reassures lenders of your ability to repay the loan and reduces the risk associated with the mortgage. Ensuring you maintain a good credit score and are diligent with your financial commitments is essential when seeking a mortgage in the UAE.

1. UAE Nationals:

• UAE nationals are eligible for mortgages in Dubai.
• Typically, they need to be aged between 21 and 65.
• UAE nationals typically have more favorable terms, and they may be required to make a down payment of around 15% to 20% of the property's value
• A minimum monthly income requirement exists, which varies among banks but is generally around AED 8,000 - AED 15,000 for salaried individuals.

2. Residents in Dubai (Including Expatriates):

• Residents of Dubai, including expatriates, can qualify for mortgages.
• Similar to UAE nationals, they need to be aged between 21 and 65.
• The UAE Mortgage Cap law mandates a minimum cash down payment of at least 20% of the property value for expatriates, however, typically a down payment of 25% can be expected.
• Expatriates typically require a minimum monthly income of around AED 15,000 - AED 25,000 for salaried individuals.

3. Non-Residents (Foreigners):

• Non-residents/foreigners, can potentially secure mortgages in Dubai.
• However, they often face stricter requirements, including a higher minimum monthly income, which can vary but is typically around AED 25,000 - AED 30,000, although it can go up to AED50,000 for salaried individuals. Some banks may not require a minimum income, but will require a Minimum AUM (assets under management with them). That is typically around 200,000 AED
• Non-residents are generally expected to provide a larger down payment which typically ranges from 25-50%
• Having a UAE bank account can be advantageous for non-residents, as it can demonstrate financial stability and facilitate the mortgage application process. Some banks may require non-residents to open a UAE bank account as part of the mortgage application process to facilitate fund transfers and repayments.

Please note that mortgage eligibility criteria can vary among banks and financial institutions in Dubai. Borrowers are advised to research specific bank requirements and consult with lenders or mortgage advisors for the most up-to-date and detailed eligibility criteria based on their individual circumstances.

Mortgage for Non-Residents in Dubai

For non-resident property buyers, the UAE mortgage market offers limited options compared to those available for UAE nationals and expats. However, there are still banks that provide home loan services for non-UAE residents, and the eligibility criteria may differ between banks.

Despite the limited options, non-residents can still enjoy certain benefits when obtaining a mortgage in the UAE, such as high loan amounts and increased flexibility. One notable option to consider with mortgage for non-residents in Dubai is the ADCB Dream Home Solutions program which finances up to 50% of the property value. This makes it worthwhile for non-residents to explore the mortgage options available to them and carefully assess the eligibility criteria set by different banks.

Mortgage For Expats in Dubai

Expatriates in the UAE enjoy a wide range of mortgage opportunities, with local banks and financial institutions offering various home loan options to finance their property purchases. As an expat, you'll need to provide a minimum down payment of 20-25% for properties worth up to AED 5 million.

To secure a mortgage for properties above AED 5 million, expatriates are required to make a minimum down payment of 35% of the property's value. This means that they need to provide a larger upfront payment compared to properties below this threshold

The ADCB Dream Home Solutions program mentioned earlier is an excellent choice when considering a mortgage for expats in Dubai, offering the potential to finance up to 80% of the property's value, making it an attractive option for expatriate homebuyers.. This mortgage plan offers an instant and free pre-approval process that can be completed online, streamlining the mortgage application process for expats and making it easier to secure financing for your dream home in the UAE.

Types of Home Loans in the UAE

When investigating how to get a mortgage in Dubai, you'll encounter two primary types: fixed-rate and variable-rate mortgages. Understanding the differences between these mortgage options is crucial for making an informed decision.

Fixed-Rate Mortgages

These mortgages provide borrowers with the security of a consistent interest rate throughout the loan term, which typically lasts around five years. This means that your monthly mortgage payments remain the same, offering predictability and stability. Fixed-rate mortgages are an excellent choice for individuals who prefer to have a clear understanding of their long-term financial commitments. It's important to note that the initial interest rate may be slightly higher than the current variable rates, but it shields borrowers from potential rate increases.

Ultimately, Fixed-rate mortgages offer Dubai residents the reassurance of a consistent interest rate throughout the loan term, typically spanning around five years. This translates to monthly mortgage repayments that remain constant, providing predictability and financial stability.

Variable-Rate Mortgages (Adjustable-Rate Mortgages - ARMs)

Unlike fixed-rate mortgages, variable-rate mortgages have interest rates that can fluctuate based on market conditions. These mortgages often start with an initial lower interest rate, making them attractive to some borrowers. However, the interest rate is subject to change periodically, typically every few years, and can be influenced by various factors, including the UAE's economic climate, global economic trends, and oil prices. Borrowers who choose variable-rate mortgages should be prepared for potential rate increases in the future.

Ultimately, variable-rate mortgages, often commencing with lower initial interest rates, can be appealing to some Dubai residents looking for initial affordability. This feature can be advantageous in a city known for its fast-paced lifestyle and diverse population.

Factors Influencing Mortgage Rates in the UAE

Mortgage rates in the UAE can be affected by several factors, including the country's economic stability, inflation rates, central bank policies, and international economic conditions. Additionally, the UAE's real estate market dynamics, such as supply and demand for housing, can also impact mortgage rates.

1. EIBOR Rates

EIBOR serves as a benchmark interest rate for financial institutions in the UAE. When EIBOR rates change, mortgage interest rates tend to follow suit. For instance, if EIBOR increases due to factors like rising inflation rates, banks may adjust their mortgage rates accordingly. It's essential for prospective homebuyers to monitor EIBOR trends as they can directly impact the cost of borrowing.

2. Inflation Rates

Inflation rates in the UAE can significantly influence mortgage rates. When inflation rises, it erodes the purchasing power of money, prompting the central bank to implement tighter monetary policies. To combat inflation, central banks may increase interest rates, leading to higher mortgage rates. For instance, if the UAE experiences an uptick in inflation due to factors like increased commodity prices, mortgage borrowers might face higher interest costs.

3. Supply & Demand

The supply and demand dynamics within the UAE's real estate market also impact mortgage rates. During periods of high demand for properties, banks may offer competitive mortgage rates to attract homebuyers. Conversely, in a market with excess inventory, lenders may adjust rates differently to manage risk.

Choosing the Right Type of Mortgage

When deciding between fixed and variable-rate mortgages, it's essential to evaluate your financial circumstances, risk tolerance, and long-term goals. Rather than pondering over the many facets of how to get a mortgage in Dubai, consider consulting with a financial advisor or mortgage specialist to determine which option aligns best with your needs. The aforementioned mortgage types are the most common in the UAE, however, additional options exist which you can find out about here.

How to Get a Mortgage in Dubai: The Application Process

In this guide to getting a mortgage in Dubai, your journey begins with finding a reputable lender or mortgage broker. Dubai offers a diverse range of options, including well-known names like Lenddoo Mortgages, Mortgage Finder and Taskmaster Commercial Broker LLC. A tool like HOLO is a digital mortgage platform that has gained recognition in Dubai for its user-friendly approach to mortgage comparison

To make an informed choice consider the following factors:

1. Interest Rates: Research and compare the interest rates offered by different lenders. In Dubai, interest rates can vary, so it's crucial to secure a competitive rate that suits your financial goals.
2. Fees and Charges: Understand the associated fees, such as processing fees, valuation fees, and insurance charges. These costs can significantly impact the overall cost of your mortgage.
3. Customer Service: Evaluate the quality of customer service provided by prospective lenders. Efficient and responsive customer support can make a substantial difference during the application process.
4. Reputation: Investigate the lender's reputation and track record in the Dubai real estate market. Look for reviews and testimonials from previous clients to gauge their reliability.

By diligently considering these factors, the next step in how to get a mortgage in Dubai is by selecting a lender or mortgage broker that aligns with your needs and preferences, setting the foundation for a smooth application process.

Acquiring Mortgage Pre-Approval

Mortgage pre-approval is an essential step that not only defines your budget but also enhances your credibility as a serious buyer. Here's what you need to know:

1. Document Preparation: Gather the necessary documents, including copies of your visa and passport, proof of income, and bank statements. The specific requirements may vary among lenders.
2. Application Timeline: The timeline for obtaining pre-approval can vary from one bank to another. However, you can typically expect to receive the final offer mortgage letter within two weeks.
3. Validity Period: Pre-approval letters remain valid for a period of 60 to 90 days. This provides ample time to search for the perfect property within your budget without the risk of your pre-approval expiring.

Remember that mortgage pre-approval is a critical step in how to get a mortgage in Dubai that not only empowers you as a buyer but also simplifies the subsequent stages of your property purchase in Dubai.

Required Documents for Mortgage Applications

When it comes to securing a mortgage in Dubai, a well-organized document portfolio can significantly streamline the process and enhance your chances of approval. Let's delve into the specifics of the documents you'll need to ensure a smooth mortgage application experience in the UAE.

Identification Documents:

• Passport: A copy of your passport is essential to verify your identity.
• Visa: Provide a copy of your UAE residence visa.
• Emirates ID: Include a copy of your Emirates ID card.
• Tenancy contract or DEWA Bill: To prove your residence.

Financial Documents:

• Salary Certificate: A salary certificate addressed to the bank confirms your income.
• Payslips: Submit your last six months' payslips to showcase your earnings history.
• Bank Statements: Furnish the last six months' bank statements for a comprehensive financial overview.
• Liabilities Information: Disclose details of all your existing liabilities, such as loans or credit card debts.

Each document serves a specific purpose in the process of how to get a mortgage in Dubai, such as verifying your identity, confirming your income, and validating the property ownership. Ensuring you have all the necessary documents in order before applying for a mortgage will help streamline the process and improve your chances of approval.

When applying for a non-resident mortgage, such as a mortgage for expats in Dubai, you'll need to provide certain documents to meet the criteria set by banks and financial institutions like HSBC, Emirates Islamic Bank, Standard Chartered, and First Abu Dhabi Bank all of who provide mortgages for non-residents in Dubai. Here is a list of common documents you may be asked to submit:

1. Proof of Funds: Typically, you will need to provide 3 to 6 months of bank statements to demonstrate your financial stability and ability to make mortgage payments.
2. Proof of Address: Non-residents will typically be required to submit documentation like a utility bill to confirm proof of Address in their home country.
3. Valid Passport: A copy of your valid passport is a standard requirement to verify your identity.
4. Salary Proof (for Salaried Individuals): If you are a salaried employee, you may be asked to submit pay slips as evidence of your income.
5. Financial Statements and Trade License (for Self-Employed Individuals): If you are self-employed, financial statements and your trade license may be required to assess your financial health and business viability.
6. Details of Pre-existing Loans: You may need to disclose any existing loans or financial obligations as part of your application.

It's important to note that specific document requirements can vary between banks and may change over time. To ensure you have the most up-to-date information and documentation, it's advisable to contact the bank or financial institution where you plan to apply for a non-resident mortgage. They can provide you with the latest details and guide you through the application process.

Always keep in mind that meeting the bank's criteria and having the latest documentation will increase your chances of a successful application to a mortgage for expats in dubai.

Mortgage Costs and Fees in the UAE

Understanding exactly how does mortgage work in Dubai in terms of the costs and fees associated with mortgages in the UAE is crucial when planning your property purchase. Below, we have outlined some of these expenses, excluding agent fees. For a more comprehensive list of costs related to buying a property, you can refer to our additional resources here*.

It's worth noting that certain banks may offer the option to include some of the property purchase costs in the mortgage, providing potential savings on upfront expenses.

1. Mortgage Registration Fee: When purchasing a property through a bank loan, you will need to register the mortgage with the Dubai Land Department (DLD). This incurs a fee that is typically 0.25% of the total loan amount.
2. Mortgage Arrangement/Processing Fee: Banks may apply a mortgage processing fee for handling your loan application. The exact amount varies, so it's advisable to check with your chosen bank for their specific charges, however, it is typically between 0.5% - 1% of the loan amount + 5% VAT.
3. Mortgage Valuation Fee: To assess the property's value, banks often require a valuation fee. The cost varies between institutions, so it's essential to inquire about the specific charges, but it is generally within 2000 AED - 5000 AED
4. Mortgage Protection Insurance: While not a fee, mortgage protection insurance is crucial to safeguard against unexpected events during the loan repayment period, providing financial security and peace of mind

The precise amount of these fees may differ between banks and cities, so it's crucial to account for these variations in your budget.

Property Insurance Requirements

When obtaining a mortgage in the UAE, property insurance is indeed a mandatory requirement set by lenders to safeguard their investment. The types of property insurance available in the UAE typically encompass buildings insurance, contents insurance, and liability insurance. These insurance types collectively ensure comprehensive coverage for your property and protect both the structure and contents of the property.

The premium for property insurance is calculated based on the combined value of the property and its contents. On average, the premium typically amounts to around 0.1% of the total value of the property. It's essential to note that this percentage may vary depending on the insurer and specific policy terms. Therefore you must ask the right questions when learning more from them about exactly how does mortgage work in Dubai when it comes down to insurance.

Buildings Insurance:

• Coverage: Building insurance is essential and covers the physical structure of the property, including common areas in shared buildings. It is often a mandatory part of the property insurance package.
• Common Scenario: Imagine your Dubai villa experiences damage due to a severe sandstorm, resulting in roof and wall damage. Buildings insurance would cover the cost of repairing or rebuilding these structural components.

Contents Insurance:

• Coverage: Contents insurance is optional but highly recommended. It provides coverage for personal belongings within the property, such as furniture, electronics, and valuable possessions
• Common Scenario: In the event of a burst pipe flooding your Dubai apartment and damaging your electronics and furniture, contents insurance would cover the cost of replacing these items.

Liability Insurance:

• Coverage: Liability insurance protects against unexpected liabilities, such as accidental damage to someone else's property or injuries that may occur within your property.
• Common Scenario: If you're a Dubai homeowner and your guest slips and injures themselves in your property, liability insurance would cover their medical expenses and any legal costs if they file a lawsuit.

Understanding and complying with these property insurance requirements is crucial when understanding how to get a mortgage in Dubai. While property insurance is mandatory, considering contents insurance or Liability Insurance is a wise choice to provide comprehensive protection for your valuable possessions and ensure peace of mind.

For more information and specific insurance rates, it's advisable to consult reputable insurance providers and financial institutions in Dubai.

Exploring Mortgage-Backed Property Deals: Three Key Scenarios

1. Mortgage Buyer - No Mortgage Seller

• In this scenario, the buyer secures a mortgage to purchase the property, and the seller owns the property without an existing mortgage.
• The buyer initiates the mortgage process by applying to a bank or lender for a mortgage. The bank assesses the buyer's eligibility based on income, creditworthiness, and other financial factors.
• Once approved, the bank disburses the mortgage amount to the seller, who receives the full purchase price.
• The buyer becomes responsible for repaying the mortgage to the bank, typically through monthly installments.
• Real-Life Example: Sarah, the buyer, obtains a mortgage from a UAE bank to purchase John's property worth AED 2 million. The bank pays John the full amount, and Sarah repays the bank over the agreed mortgage term.

2. Cash Buyer - Mortgaged Seller

• In this scenario, the buyer pays for the property in cash, while the seller has an existing mortgage on the property.
• The buyer and seller negotiate the property's purchase price and agree on a closing date.
• Seller will have to apply for a Liability Letter from their bank and have it issued to the DLD. The seller will also have to apply for an NOC from the Developer.*
• On the closing date, the buyer pays the agreed-upon amount to the seller.
• Simultaneously, the buyer's payment is used to settle the seller's existing mortgage with the bank, and the remaining amount goes to the seller.
• Real-Life Example: Emily, a cash buyer, purchases Ahmed's property in Dubai for AED 1.5 million. Emily pays the full amount on the closing date, which is used to clear Ahmed's existing AED 1 million mortgage. Ahmed receives the remaining AED 500,000.

3. Mortgage Buyer - Mortgage Seller

• In this scenario, both the buyer and seller have existing mortgages on the property being sold.
• The buyer and seller agree on the property's purchase price, and the buyer applies for a mortgage.
• The seller's bank provides a Liability Letter to the buyer's bank, notifying them of the remaining balance or outstanding amount.
• The buyer's mortgage is used to pay off the seller's existing mortgage, and any remaining amount is transferred to the seller.
• When both the buyer and seller have mortgages in Dubai, the transaction becomes more intricate due to the need for precise coordination, valuation considerations, bank approvals, complex legal documentation, and negotiations. It's essential for both parties to work closely with experienced real estate agents and legal professionals to navigate these complexities successfully.
• Real-Life Example: Lisa secures a mortgage for AED 2.5 million to purchase Michael's property valued at AED 3.5 million. Lisa's mortgage is used to clear Michael's AED 2 million mortgage, and the remaining AED 1.5 million goes to Michael.

The experienced real estate brokers at Shosty can guide you through how to get a mortgage in Dubai and are adept at handling the above mentioned scenarios. Ensuring a smooth and hassle-free process when you decide to purchase a property in Dubai with a mortgage is where we excel.

Refinancing Your UAE Mortgage

Refinancing your UAE mortgage can offer significant advantages, enabling you to capitalize on discounted fixed periods for home loans and potentially reduce interest expenses. The process entails identifying a lender with more favorable terms and conditions compared to your current lender. Notably, the UAE Central Bank allows other banks to "acquire" your existing mortgage at lower interest rates. It's a strategy frequently embraced by homeowners in the UAE, typically every 3 to 4 years, in response to evolving market offers and savings prospects.

However, it's vital to be mindful of the associated fees when contemplating mortgage refinancing. In the UAE, the maximum fee for remortgaging is capped at 1% of the outstanding balance, with a maximum limit of AED 10,000. To make an informed decision, it's essential to carefully weigh the potential savings against the costs incurred during the refinancing process. Assessing your financial situation and goals is key to determining whether refinancing aligns with your objectives.

In Dubai, favorable market conditions with speculations of a decreased interest rate, coupled with rising property values, offer an excellent opportunity for property owners to refinance their mortgages.

On the flip side, it's essential to exercise caution and not rush into refinancing decisions. While the UAE's mortgage lending rates are expected to drop in the future, property owners should carefully evaluate whether refinancing is the right move for them and have a clear picture of how a mortgage works in Dubai. Rushing into refinancing without considering all costs and potential changes in interest rates may not lead to the expected savings and could result in unexpected financial burdens.

Summary

In conclusion, navigating the UAE mortgage market and securing the perfect home loan may seem daunting at first, but with the right guidance and knowledge, it can be a smooth and rewarding experience. From understanding eligibility criteria and mortgage options for UAE nationals, expats, and non-residents, to exploring repayment options and refinancing, this guide to getting a mortgage in dubai has provided you with the essential information to make well-informed decisions and achieve your property dreams in the UAE.

As you embark on this exciting journey, remember that thorough research, careful planning, and staying informed about the latest trends and regulations in the UAE mortgage market are key to success. With determination, diligence, and the insights gained from this guide, you'll be well on your way to unlocking the door to your dream home in the UAE.