Thinking of buying a property in Dubai? This guide offers valuable insights from Mollie Credland, a Mortgage Advisor at Espace.
Mollie dives into the essential steps to prepare yourself for a mortgage in Dubai’s dynamic property market. She covers everything from understanding down payment requirements to navigating the associated costs of buying a home.
How to Get Mortgage Ready in Dubai?
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Know What You Can Afford & the Down Payment Required
If, like most people, you require a mortgage to purchase your home, an experienced mortgage advisor can be invaluable at this stage. Homeownership in Dubai requires a minimum down payment of 20% for properties under AED 5,000,000 and 30% for properties valued above AED 5,000,000 (for expats). Note that the Central Bank allows first-time buyers to borrow up to seven times their salary.
Establish How Much You Can Borrow
Borrowing limits and mortgage affordability are typically calculated the same way across all banks in the UAE. Your monthly liabilities—car loans, personal loans, new monthly installments, and a percentage of your credit card limits—must not exceed 50% of your total monthly income. This is known as your Debt to Borrowing Ratio.
Understand the Associated Costs of Buying Your New Home
Many people make the mistake of simply applying for a mortgage which only covers the price of the house they want to buy. There are several extra costs involved in buying a property and when you are calculating the amount you’ll need to borrow, it’s important you take the following into consideration.
– Dubai Land Department Fee: 4% of the purchase price + AED 580
– Mortgage Registration Fee: 0.25% of the loan amount + AED 290 –
– Real Estate Fee: 2% of the purchase price
– Property Valuation Fee: Can range between AED 2,500 – AED 3,5004.
How to Choose a Mortgage Provider?
One common mistake people make is going directly to their bank instead of exploring the market. It’s always best to consult an independent mortgage broker who can advise you on the best products available. When selecting a mortgage provider, consider interest rates, loan terms, fees, and customer reviews of the bank. There are 18 banks in the UAE currently offering mortgage lending. Many banks offer preferential interest rates if you move your salary to them (salary transfer), so consider this option if it suits your circumstances.
Apply for a Mortgage Pre-Approval Letter
A mistake we see time and time again is people missing out on their dream home due to not having obtained their mortgage pre-approval. The property market moves quickly in Dubai, and many buyers become disappointed when they lose out to a pre-approved buyer who can fully commit to purchasing the property. Pre-approval lasts 30 to 60 days (depending on the bank), is free of cost, has no obligation, and can even be extended. I advise securing your pre-approval as soon as you start your property search to avoid disappointment and stress later on.
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