Buyer's Guide to Getting a Mortgage in Dubai

If you are planning to buy property in Dubai, you have two options: pay cash or get a mortgage. Paying cash means that you don't have to pay any interest, but it requires a significant amount of savings. In comparison, buying a property using a mortgage requires less money upfront, offering greater flexibility in managing your finances. 

Getting a mortgage in Dubai can be complex, especially for non-residents, and it is important to understand the requirements and eligibility criteria before you start. In this guide for buyers, you will learn about getting a mortgage in Dubai. Whether you are a resident or a non-resident, this buyer’s guide will help you navigate the process and make the right decision about your mortgage options in Dubai.

Mortgage Financing 

When it comes to mortgage financing in Dubai, there are two types of financing institutions: banks and independent mortgage firms. Banks are the most common choice for mortgage financing in Dubai. They offer a range of mortgage financing options, such as variable-rate mortgages, fixed-rate mortgages, and Islamic mortgages. Some major banks that offer mortgage financing in Dubai are Emirates NBD, HSBC, Dubai Islamic Bank, and Abu Dhabi Commercial Bank (ADCB). Independent mortgage firms are another option for mortgage financing in Dubai. These firms specialise in providing mortgage services and products to clients. Their terms and conditions are more flexible than banks, but interest rates and fees might be higher. 

When looking for a mortgage, it is recommended that you use a mortgage broker. A mortgage broker acts as an intermediary between the borrower (the buyer) and the lender (the bank). Mortgage brokers will work with multiple lenders and have access to lots of different mortgage products in order to find the best mortgage for you. This can be extremely beneficial, potentially saving you thousands in interest by getting the best rate and also getting a mortgage with the right terms and conditions for you.

Eligibility Criteria 

Before applying for a mortgage in Dubai, you should understand the typical eligibility criteria. Here are the most common eligibility requirements:

Age: You must be between 21 and 65 years of age 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 15K for salaried and AED 25K for self-employed individuals.

Credit Score: Your credit score is an important factor that determines your eligibility for a mortgage. Banks will check your credit history to see if you have a good track record of repaying your debts on time.

Residency Status: You need to be a resident of the UAE or have a valid UAE residency visa to apply for a mortgage. Non-residents may also apply for a mortgage, but their requirements are different. You can also check our guide on how expats can buy their own property in Dubai.

Documentation

When applying for a mortgage in Dubai, you need to provide certain documents to support your application. These documents may include your passport or visa, Emirates ID, salary certificate, bank statements for the past six months, and proof of residence (copy of tenancy contract or DEWA bill). You have to ensure all the necessary documents are ready before applying for a mortgage.

Process of Getting Mortgage

The process of getting a mortgage in Dubai is straightforward by following the steps given below:

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. Mortgage brokers have valuable knowledge and insight into the local market and will compare all suitable mortgage products to find you the one that is best for you. This allows you to put your efforts into finding the right property instead of getting caught up in the mortgage process.

Choose the Mortgage

Once you have found the lender, you have to choose the type of mortgage that works best for you. You can choose between a fixed-rate mortgage with a set interest rate for the life of the loan or a variable-rate mortgage with a variable interest rate that changes over time. Most lenders have online mortgage calculators where you can input your requirements to get an idea of your monthly payment. Again, an experienced mortgage broker will be able to choose the right mortgage for you. 

Get a Pre-Approval Letter

Getting a pre-approval letter is the most important step in the process of applying for a mortgage in Dubai. This 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. It takes 3 to 5 working days for the bank to issue a pre-approval letter.

Find Your Desired Property

After receiving your 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 your dream property, you need to 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 the amount you are borrowing. When the property valuation is complete, the lender will release your loan amount so you can complete the purchase and become the property owner.

Fees Associated with Mortgage

When buying a property in Dubai, there are several fees associated with the mortgage that you need to be aware of. 

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

Valuation Fee: This fee is charged by the lender for valuing the property you are purchasing. It is usually a flat fee ranging from AED 2,500 to AED 5,000.

Processing Fee: It is charged by the lender for processing your mortgage application. It typically 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 a 3% to 6% of the monthly mortgage payment amount.

Getting a mortgage in Dubai can be a complex process, but with the proper research and guidance, it can be manageable and rewarding. It is important to research and compare different mortgage options, interest rates, and terms from various lenders to find the best deal. A mortgage is a long-term financial commitment, so it is crucial to plan your budget and make sure you can afford the monthly payments.