Leveraging your investment.
Using a mortgage in Dubai allows investors to maximize their Return on Equity (ROE) and acquire higher-value assets. The UAE banking sector offers competitive rates for both residents and international investors, provided you navigate the eligibility and Loan-to-Value (LTV) rules correctly.
1) Eligibility: Who can get a mortgage?
Dubai banks are open to lending to expatriates, but the criteria depend heavily on your residency status and income source.
Salaried Employees
- Documents: Salary certificate, 6 months bank statements, passport/visa copy.
- Consistency: Banks look for regular salary credits.
- Credit Score: A check with the Al Etihad Credit Bureau (AECB) is mandatory for residents.
Self-Employed / Business Owners
- Documents: Trade license, audited financial statements (usually 2 years), company bank statements.
- Scrutiny: Approval is stricter; banks assess company stability and cash flow.
2) Loan-to-Value (LTV) Limits
The Central Bank of the UAE sets strict caps on how much banks can lend relative to the property value. This determines your required down payment.
| Buyer Category | Property Value < AED 5M | Property Value > AED 5M |
|---|---|---|
| UAE Resident (Expat) First Property |
80% LTV (20% Down Payment) |
70% LTV (30% Down Payment) |
| UAE Resident Second+ Property |
60% LTV (40% Down Payment) |
60% LTV (40% Down Payment) |
| Non-Resident International Investor |
50% - 60% LTV (Varies by bank; expect to pay 40-50% cash upfront) |
|
| Off-Plan Property | 50% LTV (Most buyers use developer payment plans instead) |
|
3) The Hidden Costs of Financing
Beyond the interest rate, you must budget for the specific administrative fees attached to mortgage registration in Dubai.
Fee Breakdown
- Bank Arrangement Fee: Typically 1% of the loan amount (sometimes capped or waived during promotions).
- Property Valuation Fee: Paid to a third-party valuer to confirm the property price. Approx. AED 2,500 – AED 3,500.
- Mortgage Registration Fee: Paid to Dubai Land Department (DLD). It is 0.25% of the loan amount + AED 290.
- Life Insurance: Mandatory for the primary borrower to cover the loan value in case of death.
Tip: Some banks allow you to add the arrangement fee and valuation fee to the loan balance, reducing your upfront cash requirement.
4) Interest Rates: Fixed vs. Variable
UAE mortgages are generally linked to EIBOR (Emirates Interbank Offered Rate). Understanding the difference between fixed and variable terms is crucial for long-term planning.
Fixed Rate Period
Most "Fixed Rate" offers in Dubai are actually hybrid. The rate is fixed for 1, 3, or 5 years, after which it reverts to a variable rate.
- Pros: Predictable payments for the first few years.
- Cons: Reversion rates (after the fixed period) can be higher.
Variable Rate
Linked directly to EIBOR (e.g., 3-month EIBOR + Bank Margin). The rate changes as the central bank adjusts rates.
- Pros: Often cheaper if global interest rates fall.
- Cons: Monthly payments fluctuate.
5) The Application Process
Do not sign a Memorandum of Understanding (MOU/Contract F) until you have your Pre-Approval in hand. Signing a contract without financing secured puts your deposit at risk.
- Step 1: Pre-Approval (5-7 Days): Submit documents to the bank to determine your borrowing limit. This certificate is usually valid for 60 days.
- Step 2: Property Search: Find a property within your approved budget.
- Step 3: Sign MOU: Sign the purchase agreement with the seller.
- Step 4: Valuation: The bank sends a valuer to the property to confirm it is worth the purchase price.
- Step 5: Final Offer Letter (FOL): The bank issues the final contract for you to sign.
- Step 6: Transfer: The bank issues a manager's cheque to the seller at the DLD trustee office to complete the transfer.
6) Frequently Asked Questions
Can foreigners get a mortgage in Dubai?
Yes, both expat residents and non-resident international investors can obtain mortgages in Dubai. However, non-residents typically require a higher down payment (often 40-50%) compared to residents (20%).
Is it better to take a mortgage for off-plan property?
Generally, no. Mortgages for off-plan are usually capped at 50% LTV. Most investors use the developer's installment plan (e.g., 60/40 plan) during construction and only seek a mortgage (or "post-handover finance") upon completion.
What is the maximum age for a mortgage?
Most banks require the final loan repayment to be made by age 65 for salaried employees and age 70 for self-employed individuals. This can affect the loan tenure (years) you are offered.
Can I pay off my mortgage early?
Yes, but early settlement fees apply. Under Central Bank regulations, the penalty is typically capped at 1% of the amount being prepaid or AED 10,000 (whichever is lower).