Mortgage in Dubai

Jan 04, 2022

Dubai has always been considered the focus of everyone's attention due to the tourist attractions it embraces, and the advantages and facilities it offers to its residents and visitors in terms of world-class entertainment and service facilities that cannot be found in any other region in the Middle East. Given Dubai's wide range of residential property options, including apartments or villas, many people are looking to buy a home in Dubai, which can be done in one of two ways: cash or mortgage in Dubai. This article covers everything you need to know about mortgages in Dubai, from basic requirements to required documents and procedures for applying for financing to purchase a home in Dubai.

What is the concept of a mortgage in Dubai?

A housing loan, property financing, or mortgage in Dubai is obtained by applying to a bank or financial institutions to obtain a specified amount to purchase property in Dubai. The bank or financial institution approves a mortgage in Dubai under several conditions or clauses, including; it must be repaid through specified monthly installments plus the agreed-upon interest rate.

Types of mortgages in Dubai

When applying for a mortgage in Dubai, it is necessary to know the types of home purchase financing in Dubai, in order to choose what suits the budget of the property buyer and the interest rate for each type of Dubai mortgage.

The types of loans are as follows:

Fixed interest rate: This type of loan pre-approves a specific interest rate.
Variable interest rate: This type comes with a variable interest rate that depends on the market. It cannot be predicted and can be in favor of or against the mortgagee. Unlike the fixed interest rate, this type of mortgages is calculated with constantly changing interest rates, thus the monthly installment required for repayment changes according to the market interest rate, and this change can be either an increase or a decrease. The mortgagee is notified of the due installment amount in a certain month as the due date approaches. This type of interest rate is not preferable for individuals due to the risks it may cause if the interest rate increases during the loan repayment period, leading to an increase in the total loan amount.
Discounted interest rate: In this type, the borrower is offered a significant discount on the interest rate during the first few months.
Specified interest rate: The interest rate is not fixed in this type and can be changed according to the market situation and regulations. However, before the loan period begins, the maximum interest rate is agreed upon.
Compensatory interest rate: A new option offered by lenders that links a Dubai mortgage with credit accounts and personal savings of the borrower, which helps in reducing the interest rate.

Eligibility for a mortgage in Dubai

The conditions, laws, procedures, and legal paperwork vary from each bank individually, and must be implemented and fulfilled by the applicant for a mortgage in Dubai to be fully qualified to sign a Dubai mortgage contract in the UAE.

The applicant for a property purchase loan must be a UAE national or resident.
The monthly income must not be less than AED 15,000 for residents and AED 8,000 for citizens.
The age of the borrower must not be less than 21 years and not exceed 65 years, which may vary from one bank to another.
The monthly installment should not exceed 40% of the borrower's monthly salary in most cases and varies from one bank to another.
The borrower's employment period must not be less than 6 months with the employer, with the condition of job stability.
The duration of residence in the UAE must exceed one year for residents in the UAE.
The applicant must be a customer of the bank where the application for a mortgage in Dubai has been submitted, which is a basic requirement in most banks.

The amount of a mortgage in Dubai depends on several factors, the most important of which is the monthly salary given by the bank or lending entity a clear idea about the ability to pay the amount of a property purchase loan with interest or not.

Applying for a mortgage in Dubai

Salary certificate
Copy of passport
Bank statement for the last six months
Current residence address with supporting evidence
If the applicant is an employee, they must have a commercial license

Once all the documents are completed, the next step is to compare between the bank and the financial company in terms of the conditions and procedures followed by each of them along with the imposed interest rate, as all of these matters will have an impact on the economic aspect of the borrower in the future until the full repayment of the loan is made.

The stage of searching for the suitable property comes after the approval of a mortgage with property collateral in Dubai.

Purchase fees for property in Dubai

Regardless of the down payment of 25%, there are other amounts that the expatriate must pay:

Registration fees 4%
Assessment fees ranging from AED 2,500 to AED 3,000
Real estate commission usually 2% but can vary

Property purchase repayment plans

It is common for the installment amount not to exceed 25% of the monthly income, but this may vary from one bank to another.

Therefore, after reviewing the terms of the mortgage and the mortgage rate and how to repay its installments, we find that the option to obtain a mortgage with the aim of buying property in Dubai is not an easy decision to make, but rather requires a set of studies and researches in order to reach what suits the borrower.