Mortgages in the UAE: How to Arrange a Mortgage, Bank Offers and the List of Documents You Need

Mortgages in the UAE: How to Arrange a Mortgage, Bank Offers and the List of Documents You Need

A mortgage is a wonderful way to get a property in one of the most attractive places in the world: the United Arab Emirates. Furthermore local banks issue mortgages not only to residents, but also to foreign citizens. We will explain here the criteria for getting a mortgage.

Bank Mortgage Offers

Financial institutions in the UAE offer a wide choice of mortgage programmes to their clients. Borrowers can either buy a property still under construction or a finished property: for example, a flat or a villa. Clients can also take out a mortgage to buy land. Mortgage terms can differ. Most banks offer mortgages on the following terms:

  • amount — up to AED 15 million;
  • loan maturity — 5 to 25 years. The term cannot be less than five years.
  • interest rate — starts at 4.49% per year. 

Requirements on the initial payment differ significantly. Some bank programmes dictate that the borrower pay a minimum 15% of the price of the property. Under other programmes this figure starts at 50%.

What do Fixed and Decreasing Rates Mean?

In the UAE mortgage interest rates are calculated in two ways: fixed rate for the entire lending period, and with a decreasing rate as the outstanding amount payable falls. The interest rate is usually lower in the first case. For example, the fixed rate is 4.49% whereas the variable rate is 4.98%. At the same time, however, the decreasing rate is better for the borrower, as the amount of the payment will gradually fall.

Requirements on Borrowers

Banks in the UAE are client-oriented. Mortgages are given to borrowers aged 21 and older. While there is no upper age limit, practice shows that mortgage applications by people older than 55 tend to be rejected. Financial institutions in the UAE are more than ready to work with non-residents and the self-employed. The main requirement is that a client has a valid visa, and has a monthly salary of no less than AED 10,000 to AED 15,000. 

The best mortgage terms are offered to people with a good credit rating. Borrowers with a rating of 700 to 900 points are more likely to have their mortgage application approved. If a potential client has a rating below 400 points, it is highly unlikely that a bank will approve their application. You can use the services of any Credit History Bureau to check your rating.

How to Apply for a Mortgage

A mortgage application can be filed either with a bank branch or online through the website of a financial institution. The second option is easier because you submit the application from anywhere in the world. Moreover, most platforms have a built-in calculator that can help you make preliminary calculations of the total cost of the mortgage. Here, you simply need to type in the desired mortgage amount, the duration of the mortgage and the amount of the initial payment. 

After choosing the suitable programme, you must complete a small online questionnaire. The forms differ for residents and non-residents. It takes no more than two to three minutes to complete the questionnaire. While users usually find it easy, make sure you follow system hints. The preliminary decision on whether to issue a mortgage arrives on the day when the application was sent and will be valid for three months. However, the final decision will be made in the bank branch after the bank has reviewed all the documents submitted by the applicant.

Photo: Leon Macapagal (Freepik)

What Documents are Required for a Mortgage

The list of documents required for a mortgage application differs, depending on the form of residency and occupation. If the client is an employee, they will need the following list of documents:

  • passport with valid visa;
  • salary certificate;
  • account statements for the past six months;
  • real estate contract;
  • document confirming the advance payment;
  • letter of recommendation from the employer;
  • company registration documents, including a report on the financial position of the employee.

If you are self-employed, you must also provide the following documents:

  • financial records for the past two years;
  • copy of the registration with the chamber of commerce and your licence.
  • business profile on your company’s letterhead;
  • the company charter and copy of the respective board resolution. 

The list of documents will increase if the real estate is being purchased for several owners — all the co-owners will have to be joint borrowers.

If all the documents are duly submitted, the bank will sign a contract with the borrower. Then the borrower will have to make an initial payment representing a minimum of 10% of the value of the real estate transaction.

Is Insurance Necessary?

Property insurance and life insurance of the borrower are mandatory in the UAE. Whereas the amount of the insurance contribution is contingent on the cost of the acquired property, the insurance policy must be taken out with Oman Insurance Company (OIC). If the client already has life insurance, no additional life insurance is required. However, there are some requirements on the insurance policy:

  • the policy is active and all contributions have been paid on time;
  • the document was issued less than six months ago;
  • the policy covers the cost of the mortgage for the entire period.

Property insurance payments will be debited from the bank account of the borrower until the mortgage has been repaid in full.

Can a Mortgage be Repaid Earlier than the Maturity Date?

We would advise you to consult with the bank’s managers on this matter. A number of financial institutions in the UAE establish restrictions on the early repayment of a mortgage. This concerns first and foremost the imposition of a charge for any such action. The size of the fine is dictated by the bank’s internal policies, but is in any case always considerable.

Photo: Lucas Hemingway (Unsplash)

In a Nutshell

Buying property in Dubai is a real option. Even if you are about to move to the UAE for permanent residency, you can still buy property with a mortgage. Dubai banks issue mortgages to both residents and non-residents. Mortgages are issued for the purchase of a flat, villa or land.

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