Purchasing a home rather than residing in a rented house for a long time can be more advisable if you planning to stay in Dubai for a long time. On the other hand, Dubai has a relatively high return, through rental yield, and can thus be considered among the best cities to invest in if all you want is an investment property.

Whoever you are and whatever your reason for buying a home in the city, you need to know the kinds of mortgages that are out on the market and the steps you need to undertake in order to arrange one. The good news is that one can do this and mortgage providers are willing to deal with both non-resident and expatriate mortgage requirements if you are looking for a new family home or an investment.

Which mortgage types are available?

An expatriate can apply for a mortgage in Dubai to purchase an investment property or one that will be their home. The amount of the deposit that you will be expected to make however can be influenced by your circumstances as well as the specific house you intend to buy. First of all, you are to decide whether to take a fixed-rate package or a variable-rate package.

Mortgages with fixed rates:

A mortgage is a type of loan where the borrower pays interest at a certain fixed rate throughout the whole duration of the agreement. It usually takes three years but can take up to an astounding ten years. Following that, it will revert to your bank’s flat rate for a mortgage. The mortgage rates have been down since 2018 and the EIBOR rates are now at the lowest they have ever been. This is due to the government’s financial stimulus program, which is assisting the nation in growing and enhancing the mood of investors. We now offer fixed rates starting from 2.21% with no processing fees which is cheaper than we posted in the same period last year.

Mortgages with variable rates:

Taking out a variable-rate mortgage is your other choice. These can be little or much more expensive than a fixed rate contract depending on the movement in rates of interest. Another thing worth pointing out is, that rates at Dubai mortgages have gradually been falling for the past three years, therefore if you think that interest rates will lower within the course of repaying your loan, you ought to select that. As of right now, banks’ fixed margins are as low as 1.45%, down from 2.99% at the same time last year.

Although an interest-only mortgage is also an option in Dubai, its duration cannot exceed five years. Additionally, we have unique approvals (based on client profile) when banks are ready to pay the 2% agency commission and 4% DLD transfer charge above the permitted mortgage percentage.

Not every customer can access all of the loans available, and different banks and brokers will offer different options. To fully comprehend all of the items that are accessible to you, you will probably need to seek professional counsel.

Do I need to work with a mortgage broker?

You have the right to request the banking facility itself for the processing of the mortgage facility with the help of a broker. Looking for a broker you will of course have to pay some brokerage fees, but the broker will always explain that they are going to manage your transaction from beginning to end and will offer you the best solution.

However, this is situational and depending on the circumstances such as when you are in a position where you are not too sure whether or not you will qualify for a mortgage. This is especially important if you haven’t researched all of the opportunities and limitations of mortgage in Dubai.

Documentation Required

It shouldn’t take more than a few weeks to organize your mortgage in Dubai. Nevertheless, to be sure of what you will be lent, it is better to receive advance approval from the bank. You can then easily close the mortgage almost immediately after you’ve found a house that meets your requirements and financial capability.

Depending on the bank you choose, you will require different documentation. But be prepared to be questioned for the following:

• Copies of your passport and other personal identification documents
• Evidence of your creditworthiness, such as bank accounts, wage verification, tax returns, or an employer letter
• Documents demonstrating the mortgage’s affordability

Affordability plays a significant role in determining whether you receive a loan offer everywhere in the world. Many countries need you to demonstrate that the entire amount of debt you owe must not exceed 30% to 35% of your regular income. Many banks in Dubai are more accommodating than those in other nations, nevertheless, as the legislation merely stipulates that debt payments must exceed 50% of your income.

The step-by-step process

In general, you must do the following actions in order to obtain a mortgage in Dubai:

• Select a mortgage based on your requirements.
• Provide the necessary documentation to obtain a financial pre-approval, which is potentially also known as a mortgage offer. You will receive a letter from your bank confirming to the amount of the loan.
• Choose a home that fits within your price range, then work out a deal with the seller.
• To guarantee the sale, pay your deposit and decide on a completion date.
• Provide any more supporting paperwork, such as searches on the particular property you have selected, that must be provided to verify your mortgage.

Fees

When setting up a mortgage in Dubai, you should additionally budget for the following expenses and a deposit:

• 25% of the mortgage’s total value is the mortgage registration charge.
• Processing costs, property evaluation fees, and insurance registration fees are among the bank fees.
• Mortgage life insurance, often known as loan protection insurance: The expenses, which are typically required, differ based on your unique situation as well as the value of your home and mortgage.

There may be additional expenses related to loan arrangements, depending on the circumstances. The deposit you must pay to secure the loan and the sale, however, will be the largest upfront expense. This might account for as much as 50% of the entire cost, for instance, if you are purchasing an off-plan property.

Glossary of important terms

An LTV (loan-to-value) ratio: This represents the mortgage’s value as a proportion of the overall property value.

Mortgages with repayment plans: Over the course of a repayment mortgage, you repay the capital amount borrowed plus interest.

Mortgages that only pay interest: In this case, you simply pay the interest that accrues on the borrowed capital, which must be fully repaid at the end of the term.

Mortgages with fixed rates: For a specific time frame, typically one, three, or five years, the interest rate is fixed. Following this time frame, the product will return to the bank’s “follow on rate.”

Mortgages with variable rates: The bank can alter the amount of interest you pay.

Purchasing a new house is a significant step, and it might be daunting if you’re doing it abroad.

By purchasing a family home or investment property, many foreigners have established themselves in Dubai. As a result, the local financial services sector is experienced in working with foreigners, and as long as you’re in a sufficient financial situation, you should be able to simply secure a mortgage that suits you as an expat buyer.

Finally

With fixed-rate and variable-rate mortgages, competitive interest rates, and professional assistance from brokers and banks, obtaining financing is easy for those with stable finances. By being aware of the mortgage process, related fees, and necessary documentation, expats can confidently navigate the real estate market and accomplish their property goals in this vibrant city.