It’s a great time to invest in real estate! All your frequently asked questions about mortgages answered
Buying a home in the UAE no longer has to be one of those far-fetched dreams that seem too big to achieve. Have questions about loans/home finance and how they work in the UAE? We’ve answered the most commonly asked questions about mortgages that we’ve received from people over time.
FAQs ABOUT HOME LOAN/HOME FINANCE PREREQUISITES
All those questions that arise before you apply for a home loan, here’s what you need to know about them.
WHAT IS THE MINIMUM SALARY NEEDED TO AVAIL A HOME LOAN/HOME FINANCE?
To apply for a home loan/home finance in the UAE, salaried individuals must have a minimum monthly earning of AED 10k. This number may vary depending on the lender’s requirements.
WHAT IS THE INTEREST RATE FOR THE MORTGAGE IN THE UAE?
Interest rates generally depend on the lender and the loan type. However, as per the current estimate, it can range from 3.99% to 4.25%.
WHY DO I NEED A PRE-APPROVAL FOR A HOME LOAN/HOME FINANCE IN THE UAE?
It is not mandatory to obtain pre-approval for a mortgage. However, obtaining one would help you be certain that the home loan/home finance you seek will be provided to you by the concerned bank or financial institution.
It would also enable you to ascertain the maximum amount of home loan/home finance you could avail. Based on the pre-approval, you can finalise the property you want, arrange for its down payment and proceed with the valuation process.
A MORTGAGE IS SUCH A BIG FINANCIAL COMMITMENT. HOW DO I KNOW IF IT IS THE RIGHT THING FOR ME TO DO?
Indeed, getting a home loan/home finance in Abu Dhabi, Dubai, or any of the other emirates is a significant financial commitment.
You should make a thought-out decision on whether to buy property on a mortgage or cash, based on your:
- Financial condition
- Life stage
- Present liabilities/loans
- Financial goals
- Any other factors that might impact your financial future
WHAT ARE THE KEY FACTORS I SHOULD KEEP IN MIND WHEN APPLYING FOR A HOME LOAN/ HOME FINANCE IN THE UAE?
Some of the key factors that should be borne in mind while applying for a home loan/home finance in the UAE are:
- The Maximum Loan Amount: Please refer to the table detailed under the next question for information on this.
- Debt Burden Ratio (DBR): This is the ratio of total debt to the total monthly income of a customer. Your debt burden ratio should be less than 50% to apply for a housing loan in the UAE.
- Equated Monthly Instalment (EMI): This is the monthly amount (including the principal and interest) that you need to pay for as long as your home loan tenure lasts.
- Loan Tenure: This is the duration of the loan and should be carefully thought through when applying for a home loan/home finance in the UAE. It should take into account your life stage, your financial goals and your obligations.
- Choice of Interest Rate Structure: You should carefully think through the pros and cons of reducing vs fixed interest rates before making the final decision.
The last, but most important, is your choice of bank/financial institution from which you will obtain a mortgage in the UAE. The institution should be reputable for transparent dealings with its clients and should have strong customer service.
HOW MUCH DOWN PAYMENT DO I NEED TO MAKE TO AVAIL OF A HOME LOAN/HOME FINANCE AND WHAT IS THE MAXIMUM PERCENTAGE OF PROPERTY VALUE THAT I CAN GET AS A HOME LOAN/HOME FINANCE?
As per the Central Bank of the UAE, the following guidelines apply for the maximum amount of home loan/home finance one can avail, based on their individual situation.
VALUE OF PROPERTY | LTV FOR UAE NATIONALS | LTV FOR EXPATS |
|---|---|---|
VALUE OF PROPERTY Up to AED 5 million | LTV FOR UAE NATIONALS 85% | LTV FOR EXPATS 80% |
VALUE OF PROPERTY Greater than AED 5 million | LTV FOR UAE NATIONALS 70% | LTV FOR EXPATS 65% |
COMPLETED 2ND PROPERTY
VALUE OF PROPERTY | LTV FOR UAE NATIONALS | LTV FOR EXPATS |
|---|---|---|
VALUE OF PROPERTY Any value | LTV FOR UAE NATIONALS 65% | LTV FOR EXPATS 60% |
UNDER CONSTRUCTION PROPERTY
VALUE OF PROPERTY | LTV FOR UAE NATIONALS | LTV FOR EXPATS |
|---|---|---|
VALUE OF PROPERTY Any value | LTV FOR UAE NATIONALS 50% | LTV FOR EXPATS 50% |
*LTV: Loan-To-Value
The amount that is not covered through a home loan/home finance is to be paid as a down payment. The down payment for your mortgage in the UAE can range between 15% and 50%, as highlighted in the tables above.
QUESTIONS ABOUT MORTGAGE PAYMENTS IN THE UAE?
Do you have questions about payments towards a home loan/home finance after availing the same? This is what you need to know.
WHAT IF I DECIDE TO REPAY THE HOME LOAN FASTER? IS IT A GOOD THING TO DO OR EVEN ALLOWED?
You may proceed to repay your home loan/home finance earlier if you wish. However, you must keep in mind that in doing so, you might incur early settlement fees.
WHAT IF I LOSE MY JOB OR HAVE OTHER FINANCIAL DIFFICULTIES AND STRUGGLE TO REPAY MY LOAN?
As mentioned previously, you should proceed with a home loan/home finance only after careful consideration of the various factors defined.
Owning property would lead to building an asset for you. However, you should bear in mind that a property is not a liquid asset and disposing of it due to any financial constraint would not be easy.
GENERAL QUESTIONS ABOUT GETTING A MORTGAGE IN THE UAE
CAN I GET A HOME LOAN/HOME FINANCE IN THE UAE, EVEN IF I AM A NON-RESIDENT?
Yes, home loan/home finance in the UAE are offered to non-residents, but the conditions of the loan differ.
IF I AM A DUBAI RESIDENT, CAN I GET A HOME LOAN/HOME FINANCE FOR A PROPERTY IN ABU DHABI OR ANY OTHER EMIRATE AND VICE-VERSA?
Yes, you can get a home loan/home finance for a property in another emirate in the UAE.
There you have it – answers to the most commonly asked questions about mortgages in the UAE! There are various types of Dubai property mortgages available for consideration. You can choose the ones that suit you best.
If you want to invest in a home in Dubai, here’s a detailed process on how to get a Dubai property mortgage.
So, if you want to own a property in the UAE, take the time to explore the cheapest areas to buy real estate in Dubai and other emirates, based on your objective – self-use or investment, as applicable.
There are numerous options for buying real estate in the UAE. However, it is important to note that each emirate has a legal procedure in place to purchase a property. Make sure you familiarise yourself with how to purchase property in Dubai or any other emirate of your interest.
