All About Mortgages in Dubai: Accessibility, Application, and Interest Rates

Mortgages in Dubai are an excellent tool for real estate investment. We've explained how to obtain a mortgage, who is likely to get approval from banks, and outlined the main investment schemes.

Article prepared by the Inside team. Visit our website for the latest property listings.

Why Take Out a Mortgage in Dubai

A mortgage is a tool for investors and a great way to buy an apartment in Dubai. The mortgage rate in Dubai is relatively low (3.99% as of 11.01.2024).

Three ways to earn through a mortgage:

1. Rent out the property.

The key point is that mortgage payments in Dubai are currently lower than rental rates. This difference allows for earning.

For example, you could buy an apartment in the Mama Residences project for $272,350 on a 15-year mortgage, rent it out for $2,200 per month (estimated rental cost in Business Bay), and make monthly mortgage payments of $1,500. The profit is $700 per month, and there's no need to pay any taxes. After paying off the mortgage, you'll own an apartment that can be resold or continue to be rented out.

2. Taking out a mortgage to cover the developer's installment plan.

Developers in Dubai often offer various payment options. A common installment plan involves paying 40% during the construction phase and 60% upon completion. The remaining 60% of the apartment's cost can be financed through a mortgage.

When might this be necessary?

Imagine you want to buy a primary market apartment in Dubai. During the first two years of construction, you can pay 40% of the apartment's cost. However, you know that in two years, when the developer hands over the apartment, you'll need to pay the remaining 60%. If you don't have the financial means or desire to release such a large sum, a mortgage for the remaining payment is an excellent solution. Meanwhile, as the building is under construction, you have time to prepare for the mortgage - secure a job in the UAE, obtain residency, or start a company.

Thus, during the construction period, you can meet the bank's requirements (which we'll discuss later).

Once construction is completed, instead of making a one-time payment of 60% of the cost, you take a mortgage, make a down payment, and gradually repay the loan using rental income. This is a great strategy for investors.

3. Using an existing property as collateral to get a down payment for primary housing.

Banks in Dubai don't provide mortgages for primary housing, but if you already own an apartment in the UAE, it can be used as collateral. You have a chance to get a bank check for 70% of your apartment's value. What's next:

• Use this check as a payment for an apartment under construction;
• Wait for the apartment under construction to increase in value;
• Resell the under-construction apartment, settle with the bank, and earn income from the difference.
• ROI should be calculated for each specific case. It's crucial to carefully select the apartment, project, and developer to avoid losses. There are risks in this strategy - the apartment may not increase in value.

Key Mortgage Rules in Dubai: Monthly Payment, Rate, and Down Payment

We've illustrated the main figures for mortgages in Dubai on an infographic.

For instance, if you want to buy a studio in the Chic Tower project by DAMAC, the total cost of the apartment is $269,273. The down payment is $53,854, which must be paid upfront. The remaining amount can be mortgaged at 4.39% for 15 years, with monthly payments of $1,654.

Now, to the main rules of mortgages in Dubai:

1. UAE banks readily provide mortgages, but only for secondary (already constructed) housing.

Two exceptions are Emaar and Select Group developers. UAE banks trust these developers and may offer mortgages even for properties under construction, but such cases are rare. Therefore, we recommend looking at secondary market properties.

1. Mortgages are available without residency.

UAE banks issue mortgages even if you don't have resident status. However, the down payment is higher for non-residents: 20% for Dubai residents and 40% for non-residents.

We can arrange residency for clients, help secure mortgages, purchase apartments, and lease them out. You can apply at Inside on our website.

1. The mortgage interest rate is regulated by the local Central Bank.

The mortgage rate is composed of the official Central Bank rate + 1.5% from the bank. Currently, the Emirates have a relatively high rate of 3.99%. Mortgage brokers note that the rate may decrease in the coming years.

Everything depends on the economic situation. If the rate decreases, you could refinance and reduce mortgage payments.

1. The maximum age for a mortgage is 65 years.

Suppose you are currently 55 years old. In this case, you can only get a mortgage for up to 10 years.

1. For every 15,000 dirhams of income, the bank is willing to lend 1 million dirhams.

For example, if a potential borrower has a monthly salary of 30,000 dirhams, the bank can lend 2 million in credit.

1. It's important to consider the credit load on your salary.?

According to bank conditions, borrowers must retain 50% of their salary after all credit payments.

Say a client has a salary of 15,000 dirhams. By the rules, after all credit payments, 50% — 7,500 dirhams — must remain. Suppose the client has a car loan costing 2,000 dirhams per month. Then, they would have even less for the mortgage — 5,500 dirhams. The bank would grant a maximum loan of 600,000 dirhams.

Overall, UAE banks are willing to provide mortgages up to 5 million dirhams. If the property is expensive, the financial institution will be ready to provide a maximum of 70% of the property's appraisal value. If it's a second mortgage, the bank will offer even less — 60%. In our partner's practice, the most expensive deal reached 18 million dirhams.

Who Can Get a Mortgage in Dubai and What Are the Bank Requirements

There are several types of borrowers, each with a different chance of securing a mortgage in Dubai.

Resident with Official Employment in the UAE

It's easiest and quickest for such borrowers to get a mortgage. The bank's requirements include:

• A minimum monthly salary of at least 10,000 dirhams (preferably 15,000).
• A good credit history with timely bill payments and no debts.
• Official employment in the UAE. The company should have a physical office to avoid suspicions of fake employment.

Banks pay close attention to the borrower's workplace, evaluating:

1. The company's duration of operation. The longer, the better, with a minimum of two years. The bank wants to ensure that the company is legitimate and not a risky startup that might close soon.
2. Salary stability. Regular, timely salary payments indicate the company's financial stability and the employee's ability to make mortgage payments.
3. Business stability. In a case handled by our partner, a pair of traders with an official annual salary of $150,000 were denied by local banks because financial institutions prefer a verifiable and reliable business with its own office.
4. Industry. Banks may consider the client's industry. For example, a real estate agent can get a mortgage, but with a 20% higher down payment due to the perceived high risk of the industry.
5. Number of employees. A small workforce of just two or three people can be viewed as suspicious by banks.

Non-resident with Official Employment in the UAE

In theory, one can work officially in the UAE without residency. For instance, a client from Brazil is transferred to a Dubai office by an international company. If he hasn't yet obtained residency but earns over 15,000 dirhams, he can secure a mortgage, but the down payment will be higher – 40% of the property value.

Non-resident with a Formal Salary, Working in Another Country

It's more challenging for such individuals to get a mortgage. They need a high income level – from 20,000-25,000 dirhams ($5,500) per month, which must be verified. They should also have at least six months of official employment and be ready to make a 40% down payment.

Our mortgage partner has handled cases where people from China and Singapore were able to buy a property in Dubai on a mortgage. You can apply for a mortgage here.

Higher chance of getting a mortgage in Dubai for employees of international companies

Banks favor clients working in international companies, approving their mortgages faster.

Business Owners in the UAE

Another popular borrower category. If a person owns a share in a business (even just 5%), banks focus less on their salary and more on the business they own.

Key factors for the bank:

1. Company reliability. An ideal business age is 3 years.
2. Company turnover and profit. The minimum annual turnover should be 2.5-3 million dirhams, and the business must be profitable.

Business Owners Outside the UAE, Without Residency

If a client owns a business not registered in the UAE, they can still get a mortgage, provided the income is official. They will need to disclose the company's turnover and be ready to present their business transparently to the bank.

Provided the financial organization is satisfied with the turnover (requirements are higher than 2.5-3 million dirhams annually) and the company's duration (minimum three years), there's a chance for mortgage approval.

However, each case should be considered individually. If you own a large international company that has been operating for years, it's easier to open an office in Dubai and then apply for a mortgage. It's important to prove to the bank that you are a solvent client.

If you need help with arranging a mortgage in Dubai, contact us through the link.

Family Mortgage

Spouses or first-line relatives can combine their incomes to apply for a mortgage together. Both borrowers must meet the bank's income requirement (at least 10,000 dirhams).

What Borrowers in Dubai Need to Know: Variable Rate and Refinancing

The actual rate at the time of writing this article is 4.39%, which is relatively high compared to recent years.

It's important to know that three years after taking out the mortgage, your rate may increase, as local banks work with a variable rate. No one can predict what you will be paying in 5 or 10 years.

A variable mortgage rate is a rate that changes over the loan period, depending on the market situation.

However, there's a plus – if your personal mortgage rate is higher than the market rate, you can refinance. Our partner had a case where a client refinanced three years later when the rate was lower than at the time of mortgage initiation. Now, the borrower pays 1,000 dirhams less per month than initially.

How Mortgage Application Works in Dubai: Step-by-Step Guide

1. Process the request. We check if you meet the basic bank requirements, have residency, an official salary, or a business. We determine the down payment size, calculate which properties are suitable for a mortgage, and what can be done to meet bank requirements.
2. Choose two or three banks and submit documents. The standard set includes identity documents, bank statements, employment verification, etc.
3. Receive a preliminary approval letter. The letter specifies the client's name, available amount, and the term for which the bank is ready to provide the mortgage.

If the case is complex (business abroad, no residency, or salary abroad), preliminary approval can take up to two weeks. If the company is well-known and large (like Google) and has a long market history, preliminary approval can be obtained in as little as one hour.

1. Choose a property within the budget. The client has 60 days to select an apartment for the mortgage. The bank's preliminary approval expires after this period but can be extended. If more than five months have passed since the expiration, the mortgage application must be resubmitted.
2. Undergo property appraisal. The client makes the first payment – usually 10% as a reservation for the apartment. The buyer also pays for the property appraisal, averaging 1,900 dirhams. The bank conducts an independent appraisal through specialized companies and issues the mortgage based on this value.

Renovations are almost never considered in the appraisal, and the bank may add a maximum of 30,000-40,000 dirhams for it.

1. Prepare for the transaction. The bank now knows the property's value, the client's chosen property, interest rate, down payment, and payment schedule. Finally, the client signs a document – FOL (A final offer letter), which outlines all terms.
2. Redirect funds within three days. Payment is not transferred to the client's account. The bank issues a check and transfers it directly to the seller or developer, depending on who the buyer is dealing with.
3. Complete the purchase transaction. The seller, bank representative, and buyer exchange documents. Within a few hours, the title deed (ownership document) is in the buyer's hands.

The entire process of arranging a mortgage, choosing, and purchasing property is accompanied by Inside – we handle everything. We are ready to take on all questions regarding mortgage and residency arrangements – contact us through the link.

Important Mortgage Questions in the UAE: Is Insurance Mandatory, and What Happens if You Miss a Payment

Is it mandatory to get insurance for the apartment or borrower?

Most banks offer basic borrower insurance at the time of signing the contract, but they don't enforce additional payments.

We recommend getting insurance – it's affordable and offers substantial benefits. The cost of insurance is 0.1-0.03%. With this, you get basic coverage. In the event of the borrower's death, the insurance will cover the mortgage, and the borrower's heirs will receive the property without any encumbrances.

For example, if you take a mortgage of 1 million dirhams for 25 years at 4.39% per annum, your monthly mortgage payment will be 5,496 dirhams. Insurance for a sum of 1 million dirhams will cost 200 dirhams per month. The total monthly payment with insurance will be just 5,696 dirhams.

What happens if you stop paying the mortgage?

If the payment is overdue for the first time, the bank imposes a penalty of 10% of the monthly payment. If the required sum is not received again, the bank contacts the client to find out what happened.

In cases where the person is in a difficult situation - lost their job or became seriously ill - the bank may grant a payment holiday. For example, during the pandemic's onset, banks offered a 3-month holiday to their clients due to payment difficulties and job issues.

However, if a client is uncooperative, unresponsive to letters and calls, the bank initiates a foreclosure process. The property is seized through court and sold at auction.

Can you pledge your property as a down payment?

Yes, you can pledge an apartment to the bank, receive 50% of its value, and spend the money as you like. However, the rate will be high – 9% per annum.

There's an option to reinvest the funds in other property. Suppose you have an apartment worth 1 million dirhams. You can come to the bank and pledge it. In this case, you'll get 70% of the appraisal value (700,000 dirhams). The bank will issue a check in the developer's name, which can be used as a down payment for an under-construction property.

We can help with residency processing, selecting a liquid asset, and obtaining a mortgage in the UAE. Submit your application on our website through the link.