‘Home loans in Dubai’ is something potential homeowners search for when buying apartments or villas in Dubai. Similarly, another search term used often is ‘home loan for NRI in Dubai’. Considering the large population of Indians in Dubai, this is not surprising. When expats make Dubai their home, they want to buy a property that suits their taste and fits within their financial means. Since many people are searching for the term ‘home loan in Dubai, ’ MyBayut has compiled a list of essential information one needs to know before getting involved in the process.
Home Loans in Dubai for Expats
Regarding the application process for home loans in Dubai, remember that banks must follow specific criteria to offer loans.
Usually, banks in the emirate have four main criteria for home loan eligibility in Dubai:
- Time spent in the UAE (typically six months to a year)
- Length of employment in UAE (typically a minimum of 6 months)
- A business period in UAE (typically 2 to 3 years)
- Credit history
* Your employer must be listed with the bank. This is a key condition for home loan eligibility in Dubai.
Home Loans in Dubai: Pre-requisites
As expected, home loans or mortgages are common in Dubai, and the UAE Central Bank lays out clear rules. Home loans in Dubai for expats are given out on certain conditions (along with the ones mentioned above).
The first step of this process is to determine how much money you need to pay upfront. This is usually done by obtaining a pre-approval from the bank. Bayut has partnered with ADCB to offer instant home loan pre-approvals through the ADCB Dream Home platform.
Second, you would want to know the duration of the mortgage. You can evaluate the pros and cons of flat vs reduced interest rates to decide wisely. All these are key considerations for any expat looking for Dubai mortgages.
Moreover, one should remember a few other things when applying for a home loan in Dubai for expats.
Upfront cost
There are certain payments expats have to make to get a home loan in Dubai. The UAE Central Bank enforces these rules. Here is what you need to save up for:
- 25% of the purchase price as a down payment (properties less than AED 5M)
- 4% transfer fee
- 25% mortgage registration fee
- Valuation fee – ranges from AED 2,500 to AED 3,000
- 2% real estate commission (can vary)
Some banks in Dubai allow mortgage takers to add three-quarters of the total purchase fee to their home loan.
Mortgage Pre-approval
Before you start house hunting, you should obtain a mortgage pre-approval. This is crucial as you can narrow your search per your budget. Moreover, when you sign a sales agreement, you must give a cheque for 10% of the purchase price. If you don’t have financial approval and are refused bank finance later, you will lose the deposit money to the bank.
Valuation Clause in the Sales Agreement
Ensure your agreement has a property valuation clause. Before the bank offers a loan, it will conduct a property evaluation. If the valuation shows that the property is overpriced, the bank will refuse to lend you money. In this case, the valuation clause protects the buyer’s deposit. Alternatively, the valuation could be done before the signing of the sale agreement.
Repayment value
Typically, the bank’s repayment plan is based on your monthly income. Repayment value is usually no more than 25% of your monthly payment. If you have other loans (car loans or any other repayments to the banks), that amount is also deducted from the calculations. Banks calculate borrowing capacity (total money offered) with unique formulas.
Mortgage duration
The maximum loan period allowed in the UAE is twenty-five years, with an age limit of 65 years for salaried people and 70 years for self-employed. Naturally, a longer-term loan cuts down your monthly payment but increases the total interest amount. Borrowing capacity also goes up with a longer-term mortgage in Dubai.
You can also opt for a longer-term loan and cut down the years by paying extra each year. You can repay 10% of the principal amount each year, facing no penalty. It is best to seek professional advice before making any decision based on your home loan Dubai searches.
Home Loan Rates in Dubai
Home loan interest rate in Dubai can range from 2.99 to 5%. If you opt for a fixed rate, this would usually be for two years. After that, a revision rate will apply. The revision of home loan rates in Dubai could be higher if you paid a lower upfront amount. You can also get a fixed rate offer for five years as well. However, that rate would be higher, usually close to 5%.
Another option for home loan Dubai applicants is to look at variable interest rate mortgages. But remember, predicting the total money you have to pay in the long run is tricky.
Accurate budgeting is almost impossible. However, if you have a sound understanding of the market and feel that interest rates are likely to go down, variable interest rates would mean you will pay less. Also, one should consider the worst-case scenario as well. What if your predictions and calculations go wrong, and the interest rates increase? Do you have the money to pay for it? This is a critical choice you have to make.
Switching Mortgage Providers
Switching to a mortgage provider has become a little easier in recent years. The penalty is now capped at AED 10,000, which earlier was 5% of the amount. However, if you negotiate with the bank, they can often offer you more attractive terms depending on the market situation.
FAQS ABOUT PROPERTY LOAN IN DUBAI
I WANT TO BUY A PROPERTY IN UAE. SHOULD I GO FOR CASH OR A MORTGAGE?
If you aren’t sure whether to pay cash or go for a mortgage to buy a property, our guide contains all the necessary details to help you make the right decision.
WHAT SHOULD I KNOW ABOUT HOME FINANCE?
Buying a home in the UAE has become much easier thanks to the ADCB Dream House. If you have any further questions, our list of FAQs about mortgage requisites will help.
That concludes our discussion. While obtaining approval for your home loan in Dubai is a significant goal, it is important to follow the correct procedures to achieve it. Purchasing a property in Dubai is a major financial decision that requires a lot of hard work. Be sure to conduct thorough research and seek expert advice if you have any doubts or questions.
To acquire the best home loan in Dubai, one has to work for it. With research and some luck, you can receive the cheapest home loans in Dubai. You can start your work by learning more about the types of mortgages in Dubai before making the final call.
For those living in Abu Dhabi, you can contact banks in Abu Dhabi to learn more about your mortgage options.
You can also get real estate investor visas by investing in UAE real estate.
