Home Loans in Dubai: A Guide for Homeowners

• Home Loan in Dubai for Expats
• Prerequisites for Home Loan in Dubai
• Documents Required for Home Loan in Dubai

When considering a property purchase in Dubai, potential homeowners often search for home loans in Dubai. As expats look to establish a permanent home in Dubai, they want properties that match their preferences and financial capabilities. To help, MyBayut has curated a comprehensive guide to the essential information you need to know before applying for a home loan in Dubai.

Home Loans in Dubai for Expats

When applying 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 the UAE (typically a minimum of 6 months)
• A business period in the 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.

Prerequisites for Home Loans in Dubai

As expected, home loans or mortgages are common in Dubai, and the UAE Central Bank sets clear rules. Home loans in Dubai for expats are given out on certain conditions (along with the ones mentioned above).

The first step is to determine how much you need to pay upfront. You usually do this by getting a pre-approval from the bank.

Second, you’ll want to know the mortgage term. You can evaluate the pros and cons of flat vs reduced interest rates to reach a well-informed decision. These are key considerations for any expat looking for a mortgage in Dubai.

Moreover, one should remember a few other things when applying for a home loan in Dubai for expats.

Upfront cost

Expats must make certain payments 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, get a mortgage pre-approval. This is crucial because it lets you narrow your search to 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 the bank later refuses finance, 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 value the property. 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 can be done before signing 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 income. 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. A longer-term loan reduces your monthly payment but increases total interest. Borrowing capacity also goes up with a longer-term mortgage in Dubai.

You can also opt for a longer-term loan and reduce the term by paying extra each year. You can repay 10% of the principal each year without penalty. It is best to seek professional advice regarding your home loan in Dubai.

Home Loan Rates in Dubai 

Home loan interest rates in Dubai can range from 2.99 to 5%. If you opt for a fixed rate, it’s usually for two years. After that, a revised rate will apply. Your home loan rate revision in Dubai could be higher if you paid a lower upfront amount.

You can also get a fixed-rate offer for five years. However, that rate would be higher, usually close to 5%. For more detail, refer to our guide, which explains the difference between flat and reduced interest rates.

Another option for home loan Dubai applicants is to look at variable Dubai mortgage rates. But remember, predicting the total amount you pay over the long term is tricky.

Accurate budgeting is almost impossible when it comes to Dubai mortgage rates. However, if you understand the market and expect interest rates to fall, variable rates could mean you pay less.

Also, one should consider the worst-case scenario as well. What if your predictions and calculations are wrong and interest rates rise? Do you have the money to pay for it? This is a critical choice you have to make.

Switching Mortgage Providers

Switching mortgage providers has become a little easier in recent years. The penalty is now capped at AED 10,000, down from 5% of the amount. However, if you negotiate with the bank, they may offer more attractive terms depending on the market.

Documents Required

To secure a home loan or mortgage in Dubai, you’ll need to provide the following documentation:

Proof of Identification:

• Original Emirates ID and a copy
• Valid Passport Copy with resident visa page (Include old passport copy if the visa was stamped on it)

Documents for Salaried Individuals:

• Latest salary certificate addressed to the bank
• Recent payslips
• Proof of previous employment (if current job is less than 3 years)
• Bank statements for the past six months

Documents for Self-Employed Individuals:

• Valid Trade Licence copy
• MOA (Memorandum of Association) with amendments
• Bank statements for the past six months
• The latest 2 years’ audited financial statements

Documents for Co-Borrowers:

• Valid Passport and visa page
• Income proof (if necessary)
• For company co-borrowers: MOA, trade licence, and partner passport copies

Note: Banks may request additional documents at their discretion.

Preparing these documents beforehand will streamline the application process. Most banks in Dubai offer home loans covering 75-80% of the property value. You’ll need to provide the remaining amount as a down payment.

Since these banks in Dubai offer different Dubai home loan rates, it’s better to visit the bank in person to learn more details.

That concludes our discussion on home loan interest rates in Dubai. While obtaining approval for your mortgage loan in Dubai is a significant goal, it is important to follow the correct procedures.