Obtaining property finance in Dubai
Obtaining property finance in Dubai
A foreigner’s guide to getting a mortgage to buy real estate in Dubai.
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Image by Masrur Ashraf via Flickr
This article is intended as a preliminary guide only and refers to some but not all elements required to consider in detail prior to starting any property dealings or due diligence. Property dealings are often complex, especially in foreign countries and we highly recommend you seek independent professional advice... read more...
When looking to buy property, it's important to understance your financing options. Dubai has regulations around financing that may be different to what you are familiar with.
Who can borrow for property in Dubai?
In 2002, Dubai’s Crown Prince, General Sheikh Mohammed bin Rashid Al Maktoom issued a Freehold decree, allowing foreigners to buy, sell, lease and rent property in a move which has put Dubai on the map as a hot spot for foreign investment. But expats can only buy in areas designated specifically for expatriate freehold and leasehold sales.
Find locations you can consider here.
How much can I borrow?
Foreigners can generally borrow up to 75% of the purchase price of a property, depending on the financial institution and subject to regulatory requirements. Prior to the market crash of 2008, it was fairly easy for expats with a high credit rating to obtain a mortgage in Dubai that covered nearly 90 percent of the property cost. However, since the recession, banks have tightened their lending procedures, and now it is not unusual for buyers to pay between 20 to 50 percent of the purchase price of the property in cash. Some mortgage lenders even require collateral in the form of another property. Mortgages are paid back in monthly instalments, with 15-year plans being the most popular. The maximum length of a mortgage plan in Dubai is 25 years. In 2013, the Central Bank of the UAE set mortgage limits for non-UAE Nationals to 75% for properties valued at US$1,360,000 and under, and 65% for values over US$1,360,000.
For second properties, the limit is 60% irrespective of value. For properties bought ‘off-plan’, the limit is 50% irrespective of value.
Mortgage repayments, combined with any other monthly expenses, must not exceed 35 percent of net monthly income, and the total mortgage amount is limited to a figure no more than 60 times the monthly combined household income.
The Commercial Bank (CBI) UAE offers residential home loans at an interest rate of 2.99% (Nov 2016) and commercial property loans are offered at 2.73% from Noor Bank (Nov 2016).
Many of the institutions that offer mortgages also offer the option for “pre-approved financing”, which allows the buyer to have their loan approved prior to choosing their property in Dubai. This expedites the overall process and satisfies those sellers that require financing before agreeing to sign the MOU (Memorandum of Understanding) or purchase agreement. And, conveniently, it is possible to arrange a mortgage from overseas. Different lenders may have different eligibility criteria so it is a good idea to shop around.
Mortgage brokers offer comparison rates from various banks. Jean-Luc Desbois, the managing director of Home Matters, spoke to The National and said “Consumers now are looking for better value for money, not just lower interest rates, but terms and conditions and exit fees.” Home Matters compares over 30 local banks and provides the buyer with finance options, and will guide you through the consultation throughout the whole property transaction. Ask about fees upfront.
A variety of repayment options are available on loans with rates fixed for a number of years or variable, usually based on the Emirates Interbank Offered Rate (EIBOR.) This is set by the Central Bank of the UAE which oversees the national economy and stability of the currency.
If your funds are in an overseas account, check with your real estate agent to see if they can assist. Firms such as Hunt and Harris have a partnership with First Rate FX to assist clients that need to make overseas transfers and do not charge handling fees or transfer charges levied by most banks.
To give you an indication of what you can borrow, you can talk to finance brokers with local knowledge, such as Home Matters.
Expats will need to present lenders with the following documentation:
- Passport and copies
- Proof of residence
- Proof of address
- Salary certificates or evidence of regular income
- Bank account statements for three to six months
More information
Further information about eligibility and Dubai home loans can be found on these banks’ websites:
Article source:
See also:
Glossary of terminology in the UAE
This article and the above linked artciles are not complete and are intended as preliminary guides only. These guides refer to some elements to consider prior to starting any property dealings or due diligence. Property dealings are often complex areas, especially in foreign countries and we highly recommend you seek independent professional advice... read more...
