Buying your own home in Dubai is still a far-fetched dream for many. A way out to achieve this dream is to opt for mortgages offered by financial institutes. However, buying a property on a mortgage is a multi-layered step with many questions. Some of them include: What if I am unable to pay the loan? Will I face criminal charges if unable to pay the loan? and many others..
For your convenience, here we have answered all the common FAQs about getting a mortgage in Dubai.
FAQs About Mortgages in Dubai
The financial institutes offer different types of home loans in Dubai and each comes with its own pros, cons and conditions. That said, an array of options and conditions and varied bank requirements often create confusion among the applicants.
In the following paragraphs, we have answered some of the most common questions for mortgages in Dubai to clear the confusion.
What Is a Mortgage?
A mortgage is an amount provided to the borrower for purchasing residential or commercial property. The amount is paid back to the lender in instalments which includes; the principal amount and additional interest. Till the loan is paid fully, the property is under the name of the lender and after completely paying it off, the borrower can transfer it.
Prior to initiating the process, here are some things to consider before securing a mortgage in Dubai that you must know.
What Are the Types of Mortgages in Dubai?
To facilitate varied customers, banks in Dubai offer different types of home loans, each having its own pros, cons and facilities.
Following are the types of home loans generally offered to customers.
- Fixed Rate Mortgage: In a fixed rate, the interest rate is fixed for a certain time.
- Variable Interest Rates: The interest rate is variable and can be increased or decreased according to the financial situation and other factors.
- Capped Mortgage: In this type of mortgage, the interest rate is variable, but it can not exceed a certain limit set by the lender.
- Remortgage: As evident from the name, remortgage is acquiring another mortgage to wave off the current one.
- Offset Mortgage: Borrowers of offset mortgages can link their savings account with the mortgage account. In case of any due payments, the bank can withdraw money from the savings accounts to clear the dues.
- Investment Mortgage: This type of mortgage is used to buy an investment property.
- Non-Resident Mortgage: It is a mortgage specifically designed and provided to expats in the UAE. For more information, read our blog on home loans for expats in the UAE.
What Documents Are Required to Apply for a Mortgage?
The set of documents asked by the bank to secure a mortgage depends on the bank, account type and mortgage type. Generally, banks require the following documents:
- Emirates ID/Passport (Copy)
- Residency evidence like DEWA bill or tenancy contract (Copy)
- Income proof/ bank statement for the past 6 months
- Proof of employment
- MOU (Copy), if applicable
- Title Deed (Copy), if applicable
For Self-employed borrowers:
- Company’s bank statement
- Articles and Memorandum of Associations
- Audited financial statements
- Trade Licence (Copy)
- Board resolution (Copy)
What Is Mortgage Pre-Approval?
Mortgage pre-approval is the first legal document provided to the borrower by the lender. The letter simply states that the loan application of the borrower has been approved by the bank, and the requested amount will be paid.
Moreover, it also features some terms and conditions of loan amount provision. The letter is only valid for 60 days; during this period, it can be used to negotiate the price and finalise the property deal. Here is how you can get a mortgage pre-approval in Dubai.
If you have already acquired pre-approval and are looking for property units, browse through these property units for sale in Dubai and choose from an array of listed units.
What Is the Maximum Mortgage Duration?
In Dubai, the maximum mortgage limit is 25 years. However, this tenure should be completed before retirement, that is, 65 years for salaried borrowers and 70 years for self-employed borrowers.
Are Expats Allowed to Apply for a Mortgage?
Yes, expats can leverage mortgages that are specifically designed for non-residents. However, only some of the banks offer expat loans; therefore, it is better to consult with the bank prior to filling out the loan application.
Besides, read through these tips to avoid getting mortgage applications denied when applying for expat loans.
What Is the Maximum Mortgage Lending Limit for Home Loans?
Generally, the mortgage lending limit is 25% of the borrower’s monthly income. However, lenders also consider other factors like a current loan, credit score, income type, assets and other savings. That said, considering all of these factors, the lending limit is generally set lower than 25%.
It is suggested to verify all of the above-mentioned factors and check your credit score to avoid getting your loan application denied.
What Are the Eligibility Criteria for Home Loans in Dubai?
Following are the eligibility criteria for acquiring a home loan in Dubai.
- The borrower must be 21 years or above
- Should have a stable income and adequate credit score
- Minimum salary requirement of AED 10,000 (Expats) and AED 7,000 (UAE nationals)
- The borrower is able to complete the mortgage before retirement
Can I Leave the UAE If I Have a Mortgage to Pay?
Yes, borrowers are allowed to leave the country even when they have a mortgage to pay. However, the borrower might have to keep the property buy-to-let and pay the instalments on time.
Who Is a Mortgage Broker?
A mortgage broker or mortgage consultant is an advisor who facilitates borrowers in the mortgage-acquiring process from the bank. They are responsible for dealing with the bank on behalf of borrowers and assisting in completing other steps.
If you are thinking of hiring a mortgage broker, here are some pros and cons of using a mortgage broker in Dubai that you must consider.
What Is the Mortgage Interest Rate in Dubai?
The mortgage interest rate in Dubai is variable and depends on multiple factors. However, it generally falls between 2.99% and 5% of the principal amount.
These were all the answers to commonly asked FAQs about getting a mortgage in Dubai. Once you get through the application process, start searching for the property, as it is a time-consuming process. That said, for efficient property search, opt for online platforms like dubizzle. You can browse through a number of villas or apartments for sale in the UAE and choose the ideal property as per your preferences.
Besides, if you already have a mortgaged property, here is how you can sell the mortgaged property and buy another one.
Stay tuned to dubizzle’s property blog to know more frequently asked questions about getting a mortgage in Dubai.
