‘Home loans in Dubai’ is something that potential homeowners search for quite a bit when they plan on buying apartments or villas in Dubai. Similarly, another search term used often is ‘home loan for NRI in Dubai’. Considering the large populations of Indians in Dubai, this is not surprising.
When expats make Dubai their home, they want to buy a property that suits their taste and fits within their financial means.
Since many people are searching for the term ‘home loan in Dubai’ MyBayut has put together a list of essential information one needs to know before going into the process of starting an application process for home loans in Dubai.
Home Loans in Dubai: A Guide for Expats
Banks have to follow a certain set of criteria to offer home loans in Dubai. Usually, banks in Dubai have four main criteria for home loan eligibility:
- Time spent in the UAE (typically 6 months to a year)
- Length of employment in UAE (typically a minimum of 6 months)
- A business period in UAE (typically 2 to 3 years)
- Credit history
* Your employer must be listed with the bank. This is a condition for home loan eligibility in Dubai.
Home Loans in Dubai: Pre-requisites
As you would expect, home loans or mortgages are common in Dubai and clear rules are laid out by the UAE Central Bank. Home loans in Dubai for expats are given out on certain conditions (along with the ones mentioned above).
The first step of this process is to find out how much money you would need to pay upfront. This is usually done by obtaining a pre-approval from the bank. Bayut has recently partnered with ADCB to offer instant home loan preapprovals through the ADCB Dream Home platform.
Second, you would want to know the duration of the mortgage. You can evaluate the pros and cons of reducing vs fixed interest rates to make a wise decision. All these are key considerations for any expat looking for Dubai mortgages. Moreover, there are a few other things one should keep in mind when applying for a home loan in Dubai for expats.
Upfront cost
There are certain payments expats have to make 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)
* There are some banks in Dubai which allow mortgage takers to add three-quarters of the total purchase fee to their home loan.
Mortgage Pre-approval
Before you start house hunting, you should obtain a mortgage pre-approval. It gives you a clear confirmation about their budget. This is crucial as you can narrow down your search as per your budget. Moreover, when you sign a sales agreement, you have to give a cheque for 10% of the purchase price. If you don’t have financial approval and are refused bank finance later, 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 conduct a property evaluation. In case 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 could be done before the signing of the sale agreement.
Repayment value
Typically the bank’s repayment plan is based on your monthly income. In most cases, repayment value is 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 their individual, 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. Naturally, a longer-term loan cuts down your monthly payment but increases the total interest amount. Borrowing capacity also goes up with a longer-term mortgage in Dubai.
You can also opt for a longer-term loan and cut down the years by paying extra each year. You can repay an extra 10% of the principal amount each year facing no penalty. Before making any decision based on your home loan Dubai searches, it is best to seek professional advice.
Home loan rates in Dubai
Home loan interest in Dubai can range from 2.99 to 5%. The general trend is that the rates are lowering slightly and expected to go down further in the future. However, things can change. If you opt for a fixed rate, this would usually be for two years. After that, a revision rate will apply. If you have paid a lower upfront amount, the revision rate could be higher. You can also get a fixed rate offer for five years as well. However, that rate would be on the higher side, usually close to 5%.
Another option for home loan Dubai applicants is to look at variable interest rate mortgages. But remember, it is tricky to predict the total money you have to pay in the long run. Accurate budgeting is almost impossible. However, if you have a sound understanding of the market and feel that interest rates are likely to go down in the future, variable interest rates would mean you will pay less. However, one should also consider the worst-case scenario as well. What if the predictions and your calculations go wrong and the interest rates go up? Do you have the money to pay for it? This is a critical choice one has to make.
Switching Mortgage Providers
In recent years switching a mortgage provider has become a little easier. The penalty is now capped at AED 10,000. which earlier was 5% of the amount. However, usually, if you negotiate with the bank, they can often offer you more attractive terms depending on the market situation.
Buying a flat in Dubai or any other property is a huge financial decision and it requires a lot of hard work. Research thoroughly and take expert advice when there is any confusion. To acquire the best home loan in Dubai, one has to work for it. With smart research and a little bit of luck, you can acquire the cheapest home loans in Dubai. You can start your work by learning more about the types of mortgages before making the final call.
Getting your home loan Dubai approved is a goal, but you have to follow the process to attain it. With the right home loan in Dubai, you can have a dream home and a secure future. For those living in Abu Dhabi, you can contact banks in Abu Dhabi to learn more about your mortgage options. You can also get real estate investor visas, by investing in UAE real estate.
Keep following MyBayut, UAE’s leading real estate blog for more tips on buying properties in Dubai.
