Getting a mortgage is a significant milestone, especially in a vibrant business hub like Dubai, UAE. However, when you're self-employed, securing a mortgage can be trickier. Dubai has shown to be an excellent destination to start a business and provide for your family, but you may be wondering if there are any issues with getting a mortgage when you are self-employed. Well, our study further focuses on whether any problems are getting a mortgage when you are self-employed, criteria, and other information regarding mortgage loans for self-employed in the UAE.
Understanding Self-Employed Mortgages in Dubai
-
The Self-Employed Conundrum: Self-employed individuals in Dubai often need help applying for mortgages compared to their salaried counterparts. Lenders are naturally cautious when assessing the financial stability of those with variable income sources.
-
Mortgage Requirements in Dubai: To secure a mortgage in Dubai, whether you're self-employed or not, you'll need to fulfil specific criteria:
-
Income: Prove a stable source of income, typically with a minimum income threshold.
-
Creditworthiness: Maintain a good credit score.
-
Down Payment: Be prepared to make a substantial down payment, often around 20% of the property's value.
-
Documentation: Provide extensive financial documents, including bank statements, income tax returns, and business financials for the self-employed.
What are the Factors that affect Self-Employed Mortgage Loans in the UAE?
Several factors may be responsible for the rate, amount, and tenure of the mortgage loans, which have been discussed below:
Business Stability
When someone borrows money from a moneylender, they take a significant risk. Dubai's banks must determine how likely you are to make your mortgage payments on time to mitigate this risk. This entails demonstrating the stability of your firm if you're self-employed. Most lenders will expect you to have successfully run your firm for at least two years. The banks in Dubai won't be able to thoroughly analyse your business's soundness if you've just been in operation for a year or less. This does not rule out the possibility of obtaining a mortgage, but it may be challenging for some lenders.
Type of Company
If you're self-employed, your mortgage requirements may differ based on whether you're:
-
Sole Proprietorship
-
Limited Liability Company (LLC)
-
Freelancers
-
Free Zone Company
-
Foreign Company Branch
-
Civil Company
As a self-employed person in the UAE, the best way to get started is as a freelancer. Still, you can also establish a sole proprietorship or a civil company, which enables 100% foreign ownership.
A civil corporation can have two or more members, whereas a sole proprietorship can only have one.
A commercial or industrial business is another possibility, but if you're an expat, you'll need a local partner, a UAE national or a corporation.
Regardless of their business structure, it is suggested that all self-employed personnel have professional indemnity insurance in place to protect them. The last thing you need is a pricey lawsuit when you're just starting off.
Key things that may Improve the Chances of Getting a Mortgage
When you're self-employed, having a steady business considerably boosts your chances of acquiring a mortgage, but it's not the only thing lenders consider. You can assist the process as much as possible by:
Ensure your credit file is free of negative entries: Your credit score will play a significant role in whether or not you get a mortgage, and an adverse entry could drop it.
Keeping track of your finances:
With a good credit score, you have more possibilities. Ascertain that everything is paid in whole and on time.
Don't overspend on your credit card:
A credit card that is nearly depleted may appear to be in financial hardship, and the more significant your credit card usage, the lower your credit score.
Having the Correct License
There are two types of licenses: mainland licenses, which allow you to trade freely both within and outside the country but require you to find a local partner, and free zone licenses, which offer lucrative tax benefits and 100% ownership but only allow you to trade within the jurisdiction of your free zone.
You'll need a visa sponsored by the jurisdiction where you'll be working and a medical examination and health insurance if you're going to the UAE from another country.
What are the Eligibility Criteria for Mortgage Loans for Self-Employed Individuals?
The following are the eligibility criteria for self-employed individuals seeking a mortgage loan in the UAE:
Minimum Age Requirement
One of the eligibility conditions for obtaining a loan in the UAE is age, which applies to both salaried and self-employed applicants. Those who apply for a self-employed loan must be between the ages of 21 and 60. Unlike loans for ex-pats in the UAE, self-employed individuals can benefit from a maximum age requirement of 65 years.
Minimum Income Requirement
The minimum wage threshold for loans in the United Arab Emirates is slightly greater than that for self-employed applicants. Furthermore, the self-employed personal loan applicant must pay the current cost of their staff to the company and various other charges. Self-employed applicants are expected to have more significant monthly wages for these reasons.
Work Experience
Self-employed business owners are exposed to a variety of dangers. Even so, a self-started company that has been in operation for a few years has stood the test of time. Personal loans in the UAE require a minimum number of years of work experience for self-employed applicants.
To be eligible for a personal loan in the UAE, you must have worked for at least two years.
Annual Turnover of the Company
An annual sales turnover is separate from the income eligibility for a personal loan; it refers to the entire revenue a business owner makes over a year. Some of the best personal loans in the UAE also require self-employed people to show the bank a minimum annual sales turnover.
Documentation Required for Obtaining a Mortgage in Dubai as a Self-Employed Individual
The documentation required is as follows:
-
Identity Verification: The applicant must present their Emirates ID to the financial institution as confirmation of identity.
-
Statement of Accounts: The applicant must produce three months' worth of bank statements, as the concerned bank requires.
-
Business Evidence: Proof of Business Ownership is required from the applicant.
-
A Power of Attorney or a Memorandum of Association signed by all business members can be used to represent self-employed personal loan applicants.
-
Passports and Visas: UAE passport and visa. This only applies to self-employed expats seeking personal loans in the UAE.
-
Proof of Address: The applicant must provide proof of address in the form of utility bills.
Strategies for Obtaining a Mortgage in Dubai as a Self-Employed Individual
-
Increase Down Payment: Consider making a larger down payment, which can reduce the perceived risk for lenders and improve your chances of mortgage approval.
-
Build Strong Financial Records: Keep meticulous financial records for your business. This includes maintaining clean, well-organized bank statements, financial statements, and tax returns.
-
Steady Income Streams: Work on diversifying and stabilizing your income streams. Showing consistent earnings over time can reassure lenders.
-
Good Credit Management: Manage your personal and business credit responsibly. Pay bills on time and reduce outstanding debts to boost your credit score.
-
Mortgage Brokers: Consider working with mortgage brokers specializing in assisting self-employed individuals. They can connect you with lenders more open to working with unconventional income sources.
-
Co-Applicant: If possible, bring a co-applicant with a stable income and good credit history to strengthen your mortgage application.
Conclusion
Securing a mortgage in Dubai when you're self-employed may present challenges, but it's far from impossible. Understanding the UAE mortgage rules, meeting the requirements, and implementing strategic financial planning can enhance your chances of obtaining a mortgage and achieving your homeownership goals. Remember that seeking guidance from financial experts and mortgage professionals can be a valuable step in this journey to make your dreams of homeownership in Dubai a reality.
If you require personalized assistance or have questions about self-employed mortgages in the UAE, do contact Dhanguard. We are here to help you navigate the complexities of the mortgage application process and guide you toward a successful homeownership experience.