The real estate market of Dubai is booming and hence opens up a myriad of options for buyers across all the sections of society, ranging from residents to expatriates and even international investors. In most cases, however, it is not possible to pay for the full price of the property because its prices are quite high and investment is necessary to buy one. In such a scenario, mortgages prove to be an essential tool in helping people fulfill their dreams of owning property in Dubai.

A mortgage secures funds to pay between the amount of purchase or available funds of the buyer. In Dubai, huge options for mortgages are operational on demand, and according to the varying needs and financial standings for the buyers. Below is the entire information regarding the mortgages of Dubai based on types through which you will understand through which option you’ll get the best one whether with or without residency and purposes of properties.

Types of Mortgages in Dubai

The mortgage types, therefore, range from short-term to long-term and serve different purposes as applied to meet the various needs of various buyers and their residency. The knowledge of the mortgages types is key in supporting buyers in making appropriate choices since they are influenced by either their monetary capacity or their respective properties. Below are a few common mortgage options provided:

1. Mortgages According to Interest Type

The interest rate placed on a mortgage is sure to affect payment and therefore cost. Therefore, when choosing a mortgage, getting the right interest rate sets the ball rolling; it’s among the paramount considerations.

Fixed Rate Mortgage:

The most popularly availed mortgage in Dubai by property buyers is the fixed rate. The principal reason for availing this mortgage is due to the predictable monthly repayment that makes budgeting a much easier affair. It usually applies for a short tenure ranging from one to five years. For this particular tenure, the interest is usually fixed and is not affected by the variations in EIBOR and other market-related factors.

Advantages: Fixed-rate mortgage offers stability, which is quite ideal for someone looking for consistency in his or her payments. Shorter fixed periods usually correspond to a much cheaper rate. This allows one to a save cost, especially those planning on committing for a short term.

Variable Rate Mortgage:

They are very different from fixed-rate mortgage options, as the variable rate is changed periodically according to the prevalent EIBOR. This means that the monthly payment will change according to the market, making it a good option for those who can tolerate some degree of risk for the sake of having lower payments during more favorable periods.

How It Work: Banks are generally providing with floating rates of interest that tie-up to a fixed time period of EIBOR and provide a fixed add-on with the bank. Here, the monthly instalment goes up in case of upward movement in EIBOR and vice versa.

Short-Term Fixed Loans

Short-term fixed loaned mortgages are highly appreciated when the rate of the market happens low. Provided mostly in low rates of interests, normally of one to three years will enable saving the interest part.

Example: In Dubai, at the moment, a short-term fixed rate is offered for three-year loans at almost 3.89%. Of course, this particular option will be better advisable to those buyers that may have their finances stabilized over the short term.

Fixed Mortgages with Lengthy Repayment Terms:

A fixed long term rate usually set at five years fixes in a marginally higher rate compared to the short term option but that comes with stability for the long run. Five year fixed rate at present from the banks of Dubai stand around 3.99%, appropriate for holding up a house for the longer period of time.

2. Residency-based mortgages

Major factors determining eligibility and down payment for a mortgage in Dubai are residency status. The terms for UAE nationals, residents, and non-residents are different.

Terms for UAE Nationals

The easiest mortgage terms are accessible to UAE nationals. Only 15% of the down payment amount has to be paid by the first property bought by UAE nationals. Further, the government also offers subsidized mortgages to its UAE nationals. Thus, it is quite easy to get a home loan favorably.

UAE Residents: Expatriates

It further offers UAE nationals with a mortgage scheme that allows expats to pay down payments from at least 20% house value, while LTV refers to the percentage on the actual value of property for which a bank grants the loans.

Employment Benefits: In some countries, expatriates can make mortgage payments through simple salary deductions and hence earn lower rates.

Not a Resident:

Even though a non-resident can buy a property in Dubai, his/her mortgage options are highly limited usually confined to specific areas or types of properties and available at a lower LTV ratio of about 60% this translates to a higher cash down payment. This has primarily been because the bank views the risk of advancing to buyers who have no properties in the locality as a bit higher.

3. Mortgages by Property Purpose

The mortgage conditions, period, and rates also rely on the purpose of the property and cause for its purchase. The regulations of Dubai Mortgage consider residential, commercial, investment, and land types of properties.

It is a specialized mortgage product that is devised for the purchase of someone’s home. Most types of residential mortgages will provide one of the most favorable terms and are usually structured to facilitate 25 years of more of payback term. That would be perfect for those who want to be their very first homeowner with purchasing his or her first residence.

Commercial Mortgage

It is ideal for those people who want to buy or invest in income-generating properties, which may include office spaces, hotels, or industrial buildings. The term period of the repayment is relatively short, taking not more than 15 years to pay back, and is complex in nature due to the type of property involved.

Investment Mortgage:

Investment mortgages especially cater for the needs of buyers who would intend to generate rental income or resale profits from their property. For funding multi-unit buildings, or residential units that targeted for the rental market an investment mortgage is appropriate. To meet the needs of interest buyers of generating passive investment mortgages are available.

One such best-suited land and construction mortgage is for an individual who would want to acquire land and then go about building a property starting from scratch. Rather than distributing the full amount, it gives it in phases respecting the progression of the construction. First, it releases the initial amount which would allow a person to buy a land, and at another level of completion, releases subsequent amounts for the purposes of the construction.

4. Other Mortgage Options

Besides this, there are many other alternatives in the mortgage market of Dubai that can be refinanced or Sharia-compliant.

Remortgage/Refinance: This is simply remortgaging wherein, as the name of it gives out, an existing old mortgage is simply swapped out for a newer version. Sometimes, for much longer durations, an excellent option can turn into a decent form to enjoy higher rates or, more preferably even favorable terms and conditions, compared to before. Majority in Dubai tend to borrow mortgaged money just because there’s a benefit and enjoy interest payments after making mortgage remortgage / refinancing.

Shariah-Compliant Mortgage Products:

It also offers Shariah-compliant mortgage products like Ijara, whereby the bank purchases the property and later gives the property to the buyer for lease until the loan is liquidated. This is the Islamic lens that could fit into a viable option for Muslim buyers now seeking financing solutions that strictly fit the halal realm.

Offset Mortgage:

An offset mortgage ties two bank accounts together so that mortgage repayments can be maximized. In the case below, a borrower’s savings account is paired with a mortgage account. Thus, any amount paid extra reduces the principal amount outstanding. This is suited for those who have big savings since their interest payable goes down significantly.

FAQs

How Can I Determine My Monthly Mortgage in Dubai?

For instance, with an online mortgage calculator called Mortgage Finder, you get an estimate in a matter of seconds. You’ll just have to enter the purchase price, loan term, and interest rate to see the projected payments.

Is it hard to get a mortgage in Dubai?

Acquiring a mortgage approval in Dubai is challenging simply because the requirements are high, especially to a majority of self-employed clients. A mortgage broker such as Mortgage Finder may make this even easier and improve one’s chances of receiving the same.