Home loans in Dubai: A guide for homeowners

• Home Loan in Dubai for Expats
• Perquisites for Home Loan in Dubai
• Documents Required for Home Loan in Dubai
• FAQs

When considering a property purchase in Dubai, potential homeowners often search for ‘home loans in Dubai’. As expats seek to establish a permanent home in Dubai, they seek properties that align with their preferences and financial capabilities. To assist in this process, MyBayut has curated a comprehensive guide on the essential information to understand before applying for a home loan in Dubai.

Home Loans in Dubai for Expats

Regarding the application process for home loans in Dubai, remember that banks must follow specific criteria to offer loans.

Usually, banks in the emirate have four main criteria for home loan eligibility in Dubai:

• Time spent in the UAE (typically six 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 key condition for home loan eligibility in Dubai.

Home Loans in Dubai: Pre-requisites

As expected, home loans or mortgages are common in Dubai, and the UAE Central Bank lays out clear rules. 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 determine how much money you need to pay upfront. This is usually done by obtaining a pre-approval from the bank. Bayut has partnered with ADCB to offer instant home loan pre-approvals 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 flat vs reduced interest rates to reach a well-informed decision. All these are key considerations for any expat looking for Dubai mortgages.

Moreover, one should remember a few other things 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)

Some banks in Dubai 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. This is crucial as you can narrow your search per your budget. Moreover, when you sign a sales agreement, you must 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. If 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. Repayment value is usually no more than 25% of your monthly payment. 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 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. A longer-term loan reduces 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 10% of the principal amount each year, facing no penalty. It is best to seek professional advice regarding your home loan Dubai searches.

Home Loan Rates in Dubai 

Home loan interest rate in Dubai can range from 2.99 to 5%. If you opt for a fixed rate, this would usually be for two years. After that, a revision rate will apply. The revision of home loan rates in Dubai could be higher if you paid a lower upfront amount.

You can also get a fixed rate offer for five years as well. However, that rate would be higher, usually close to 5%. For a better understanding, refer to our guide, which details the difference between flat and reduced interest rates.

Another option for home loan Dubai applicants is to look at variable Dubai mortgage rates. But remember, predicting the total money you pay in the long run is tricky.

Accurate budgeting is almost impossible when it comes to Dubai mortgage rates. However, if you have a sound understanding of the market and feel that interest rates are likely to go down, variable interest rates would mean you will pay less.

Also, one should consider the worst-case scenario as well. What if your predictions and calculations go wrong, and the interest rates increase? Do you have the money to pay for it? This is a critical choice you have to make.

Switching Mortgage Providers

Switching to a mortgage provider has become a little easier in recent years. The penalty is now capped at AED 10,000, which earlier was 5% of the amount. However, if you negotiate with the bank, they can offer more attractive terms depending on the market situation.

Documents Required for Home Loan in Dubai

To secure a home loan or mortgage in Dubai, you’ll need to provide the following documentation:

Proof of Identification:

• Original Emirates ID and a copy
• Valid Passport Copy with resident visa page (Include old passport copy if the visa was stamped on it)

Documents for Salaried Individuals:

• Latest salary certificate addressed to the bank
• Recent payslips
• Proof of previous employment (if current job is less than 3 years)
• Bank statements for the past six months

Documents for Self-Employed Individuals:

• Valid Trade Licence copy
• MOA (Memorandum of Association) with amendments
• Bank statements for the past six months
• Latest 2 years’ audited financial statements

Documents for Co-Borrowers:

• Valid Passport and visa page
• Income proof (if necessary)
• For company co-borrowers: MOA, trade licence, and partner passport copies

Note: Banks may request additional documents at their discretion.

Preparing these documents beforehand will streamline the application process. Most banks in Dubai offer home loans covering 75-80% of the property value. You’ll need to provide the remaining amount as a down payment.

FAQS ABOUT PROPERTY LOAN IN DUBAI

I WANT TO BUY A PROPERTY IN THE UAE. SHOULD I GO FOR CASH OR A MORTGAGE?

If you aren’t sure whether to pay cash or go for a mortgage to buy a property, our guide contains all the necessary details to help you make the right decision. Did you know you don’t have to be a Dubai resident to buy a property in the emirate? If you are looking for more information. Our guide to mortgage loans in Dubai for non-residents will come in handy.

WHAT SHOULD I KNOW ABOUT HOME FINANCE?

Buying a home in the UAE has become much easier thanks to the ADCB Dream House. If you have any further questions, our list of FAQs about mortgage requisites will help.

Which banks offer mortgage loans in Dubai?

Here’s a list of top banks offering mortgage loans in Dubai:

• Abu Dhabi Commercial Bank
• First Abu Dhabi Bank
• Emirates NBD
• Dubai Islamic Bank
• RAK Bank
• Emirates Islamic Bank
• Mashreq Bank

Since these banks in Dubai offer different Dubai home loan rates, it’s better to visit the bank in person to learn more details.

That concludes our discussion on home loan interest rates Dubai. While obtaining approval for your mortgage loan Dubai is a significant goal, it is important to follow the correct procedures.

As purchasing a property in Dubai is a major financial decision, it’s best to conduct thorough research and seek expert advice if you have any doubts or questions.

To acquire a competitive Dubai home loan interest rate, one has to work for it. With research and some luck, you can receive the cheapest mortgage rates in Dubai.

A pro tip to securing a loan is to have a higher credit score. Here’s how to check your credit score in Dubai online.

Moreover, you can start your work by learning more about the types of mortgages in Dubai before making the final call. Also, you can get real estate investor visas by investing in real estate.