Planning to purchase a Home in UAE: Understand the concept of Home Loan & Mortgage

By Sakshi Srivastav - 05 Jun 2021 Last Updated: 18 Sep 2021
Planning to purchase a Home in UAE: Understand the concept of Home Loan & Mortgage

For expats seeking a luxurious lifestyle in a modern, well-developed city state, Dubai is a dream come true. Professionals move here for a variety of reasons, but it can also be a great destination for families, with a variety of activities to suit all interests and ages. If you intend to stay in Dubai for an extended period of time, you may be tempted to purchase a home that meets your specific requirements. The good news is that this is entirely possible for a foreign resident, and mortgage lenders are well-versed in dealing with expat and non-resident mortgage applications, whether you're looking for an investment or a new family home.

Whatever your reason for looking for a home in Dubai, you should be aware of the various types of mortgages available and the steps required to obtain one.

This handy guide explains which banks in Dubai offer non-residents mortgages and home loans, the paperwork you'll need to get your loan, the legal jargon, and how much it might cost.

What are the things one should know about Mortgage & Home Loan before proceeding further?

Dubai's mortgage market is very well developed. There are dozens of mortgage providers, ranging from well-known brands to smaller, more localised institutions. Because there are so many options, you'll need to do some preliminary research to learn how the various products work so you can make an informed decision about which one best meets your needs.

You can get a mortgage in Dubai as an expat for a home you want to live in or as an investment property. The amount of deposit you'll be asked to pay will vary depending on your circumstances and the specific property you want to buy. When you're looking for an investment property, you're usually seen as a higher risk, so the bank will require a larger initial deposit. Expats purchasing an investment property may be required to pay a deposit of up to 40% of the purchase price up front, with a 50% deposit if purchasing off plan. If you're looking to buy a home to live in, however, the deposit will most likely be in the range of 25%.

It's also important to be aware that the amount of mortgage you can legally receive is limited. The total amount you must repay as an expat buyer, including both principal and interest, cannot exceed the total amount you can expect to earn in seven years.

The first decision you must make is whether you prefer a fixed or variable rate product. Fixed-rate mortgages guarantee that the same interest rate will be applied throughout the term of the loan. This usually lasts about five years, after which your mortgage will revert to a rate determined by your bank.

Because this rate isn't always the best deal, it's important to read the fine print and know if you can switch if a better deal becomes available after the fixed term.

Take out a variable rate mortgage as an alternative. These can cost more or less depending on how interest rates change, unlike a fixed rate product. They're a good idea if you believe interest rates will fall during the term of your loan.

It is possible to obtain an interest-only mortgage in Dubai, but this must be for a period of no more than five years.

Different banks and brokers will offer different products, and not every customer will be able to take advantage of all of the available loans. For example, there are often specialised mortgages available for first-time buyers or investors that may not suit your needs as an expat buyer. You'll almost certainly need professional help to understand all of the options available to you.

Is it better to go to a bank or look up to Banking Consultancy?

You have the option of arranging your loan directly with a bank or loan originator, or enlisting the assistance of a consultancy.

Dhanguard is a fantastic resource for finding a mortgage and applying for home loan in Dubai. We have comparison site allows you to search for mortgages that are suitable for your needs as an expat buyer and provides you with potential options. You can then apply for your loan directly with the institution.

In some cases, such as when you're unsure whether you're eligible for a mortgage, it's a good idea to seek professional advice from our qualified mortgage service provider. This is especially true if you're new to the Dubai mortgage market and aren't familiar with all of the available options or regulations.

What are the legal requirements for obtaining a mortgage as a foreigner in Dubai?

Foreigners, whether residents or not, have been able to legally buy property in Dubai and apply for a mortgage since a change in the local law in 2002. This furled a large increase in expats purchasing homes in Dubai, either for themselves or to rent out for a profit.

Individual banks set their own terms for mortgages, and not all will work with foreign buyers due to a perception that expat buyers pose a higher risk to the bank. As a result, banks that work with foreign buyers require significant down payments before the transaction can proceed.

As a foreigner, how can I get a mortgage in Dubai?

The mortgage options available to you in Dubai vary depending on your personal circumstances and the value of the property you want to buy. Because offers vary, it's worth speaking with a few brokers or banks to see what they have to offer.

Documentation

It shouldn't take more than a couple of weeks to get a mortgage in Dubai. However, getting advance approval from the bank to confirm the amount you'll be lent is a good idea. Then, once you've found a home that fits your budget, you'll be able to complete the mortgage process more quickly.

Affordability is a major deciding factor in whether or not you will be offered a loan all over the world. In many countries, you must be able to demonstrate that the total amount of debt you owe is no more than 30 percent to 35 percent of your usual income. However, in Dubai, the law only requires that your debt payments do not exceed 50% of your income, so many banks are more accommodating than in other countries.

The procedure is laid out in a step-by-step manner

In order to obtain a mortgage in Dubai, you must first complete the following steps:

  1. Choose a mortgage that meets your needs
  2. Provide the requested paperwork to obtain a finance pre-approval, also known as a mortgage offer in principle. Your bank will send you a letter confirming the amount of money they are willing to lend you.
  3. Find a property that fits your budget and reach an agreement with the seller on a purchase price.
  4. To secure the sale, pay a deposit and set a completion date.
  5. Other costs, both in terms of taxes and the costs of arranging the loan, may apply depending on the situation. The deposit you must pay to secure the loan and the sale, however, will be the largest initial outlay. If you're buying an off-the-plan home, this could account for up to half of the total price.

Conclusion

Many expats have made Dubai their home by purchasing a family home or an investment property. As a result, the local financial services sector is used to dealing with foreigners, and if you're in a good financial position, you should be able to find a mortgage that suits you as an expat buyer fairly easily. You'll need a significant sum of money up front to pay a deposit, but if you do your homework, you should be able to find a deal that suits your needs. You could be enjoying your new permanent or vacation home in Dubai before you know it.

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