Buyer's Guide to Getting a Mortgage in Dubai

A mortgage is a good alternative to cash when buying a property in Dubai. Paying in cash is much more straightforward and doesn't involve interest, but it requires a lot of savings. On the other hand, a mortgage requires less money upfront and facilitates better cash flow management, but getting a mortgage in Dubai can be complex. In this guide, we will discuss everything you need to know to get a mortgage in Dubai so that you can find the right mortgage for you.

Mortgage Types in Dubai

The common types of mortgages in Dubai are:

Fixed-rate Mortgage

A fixed-rate mortgage's interest rate remains constant throughout the loan tenure. These mortgages provide stability, as the borrower knows how much he will pay each month. However, a borrower could pay more if the market interest rate drops below the fixed rate.

Variable-rate Mortgage

In a variable-rate mortgage, the interest rate fluctuates based on the Emirates Interbank Offered Rate (EIBOR), the benchmark rate for banks to borrow from one another in the UAE. Variable-rate mortgage offers the potential for lower interest rates but also carry the risk of higher rates in the future.

Buy-to-let Mortgage

Buy-to-let mortgages are for investors who want to purchase properties for rental income. They have a higher interest rate because the lender considers the rental income when determining the loan amount.

Islamic Mortgage

Islamic mortgages, also known as Sharia-compliant mortgages, do not involve interest. Instead, the lender purchases the property and sells it to the buyer at a profit, which is paid in instalments over an agreed period.

Off-plan Mortgage

As the name suggests, off-plan mortgages are for buying off-plan properties in Dubai. They have a higher interest rate and require a higher down payment.

Mortgage Providers in Dubai

There are two major mortgage providers in Dubai: banks and independent firms.

Banks

The Central Bank of the UAE regulates banks, so they offer security and transparency in mortgage transactions. If the borrower is an existing bank customer, obtaining a loan through that particular bank would be easier and faster. Banks also offer better interest rates and payment terms to existing customers. They offer mortgage products based on customer's needs and preferences. Some of the best banking institutions for acquiring a mortgage in Dubai are:

Mashreq Bank
Emirates NBD
Dubai Islamic Bank
HSBC
Commercial Bank of Dubai

Independent Firms

Independent mortgage firms offer personalised mortgage solutions that meet borrowers' requirements and financial situations. They may also offer cheaper processing and early repayment fees than banks. However, they do not provide security and transparency, as the Central Bank of the UAE does not govern them.

We suggest you use the services of a mortgage broker before getting a mortgage in Dubai. At Betterhomes, we act as an intermediary between the borrower (the buyer) and the lender (the bank) and help you get the best rate at the right terms and conditions.

Eligibility Criteria

The eligibility criteria for obtaining a mortgage in Dubai are as follows:

Age: You must be between 21 and 65 to apply for a mortgage in Dubai.

Income: You need to have a stable source of income that meets the minimum income requirement. The minimum income requirement varies from bank to bank, but it is usually about AED 15000 for salaried and AED 25000 for self-employed individuals.

Credit Score: Banks will check your credit score to see if you have a good track record of repaying your debts on time.

Documents Required

A borrower must have the following document at hand:

If hired by a company

Proof of employment
Salary certificate
Most recent pay slips (six months)
Bank statement (six months)
Passport copy
Stamped visa copy
Emirates ID copy
List of loans to your name
Copy of DEWA bill or tenancy agreement

If Self-employed

Company profile
Copy of company's trade licence
Memorandum of association
List of loans to your name
Emirates ID copy
Bank statements (six months)
Company bank statements (12 months)
Copy of DEWA bills or tenancy agreement

Process of Getting Mortgage

The process of getting a mortgage in Dubai is:

Find a Lender

Banks are the most common mortgage lenders in Dubai. You can approach the bank directly for a mortgage or use a mortgage broker who can work on your behalf.

Choose the Mortgage

Once you have found the lender, you must choose the type of mortgage that works best for you. Most lenders have online mortgage calculators where you can input your requirements to understand your monthly payment. Again, an experienced mortgage broker can choose the right mortgage for you.

Get a Pre-approval Letter

A pre-approval letter is an official document issued by the bank as eligibility evidence for the borrower to get mortgage financing and outlines the maximum mortgage amount. The bank takes 3 to 5 working days to issue a pre-approval letter.

Find the Desired Property

After receiving the pre-approval letter from the bank, you can start looking for your desired property. Pre-approval letters are generally valid for 60 to 90 days, depending on the lender. It gives you enough time to find the property you wish to purchase. You can hire a reliable real estate agent to help you find properties that fit your budget and preferences.

Finalise the Purchase

Once you have found the property, you must finalise the purchase by signing the lease agreement and paying a deposit. After that, your lender will conduct the property valuation to ensure it is worth your borrowing amount. When the property valuation is complete, the lender will release your loan amount so you can complete the purchase and become the property owner.

Mortgage Fees and Other Costs

You need to be aware of several fees associated with the mortgage, such as:

Mortgage Registration Fee

The Dubai Land Department (DLD) charges fees for registering the mortgage, which is 0.25% of the loan amount.

Valuation Fee

The lender charges this fee to value your purchasing property. It is usually a flat fee ranging from AED 2,500 to AED 5,000.

Processing Fee

The lender charges you to process your mortgage application. It ranges from 1% to 2% of the loan amount.

Late Payment Fee

The lender charges this fee if you miss a mortgage payment. It is usually 3% to 6% of the monthly mortgage payment amount.

Conclusion

Getting a mortgage in Dubai can be a milestone if you lack the right direction and knowledge. To find the best deal, it is advisable to research and compare different mortgage options, interest rates, and terms from various lenders. A mortgage is a long-term financial commitment, so planning your budget and ensuring you can afford the monthly payments is crucial.

Buyer's Guide to Getting a Mortgage in Dubai

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