In this guide on Dubai and UAE home mortgages, we are covering everything you need to know on getting a mortgage on an apartment or house you occupy and keep as your primary residence.
We cover mortgages on properties that are rented out for investment in a separate article here.
Compared to most other markets, in the UAE, it is more difficult and more expensive to get a home mortgage.
Foreigners without UAE citizenship make up 90% of the UAE and have no permanent residency rights. As a result, they are riskier to lend to than citizens. The result of this increased lending risk for banks is higher interest rates and more demanding mortgage application processes.
Let's cover in detail all aspects related to UAE home mortgages:
Dubai Home Mortgage Credit History Requirements
UAE banks usually require home buyers to have a minimum credit score of 720, on a scale from 300 to 900. Anything lower than that will result in higher-than-standard mortgage costs and more restrictions on your loan-to-value ratio and mortgage term length. More on that later.
You can build a good credit score by having no or little existing debt, regularly paying your credit card bills and any loan repayments, and making sure you do not let cheques bounce. A detailed overview of the factors contributing to your credit score can be found here.
You can check your credit history directly with the UAE government's Al Etihad Credit Bureau (AECB). This is where banks and mortgage brokers go to check their clients' credit info.
As of February 2023, the credit bureau charges AED10.50 for providing you with your credit score, or AED84 for a full credit report.
Many third-party mortgage brokers are willing to pay this fee for you and offer you the reports for free, however, I like to pay and check for myself to be in full control of my financial information.
If you just arrived in the UAE from abroad, or have not undertaken any credit-related transactions in the UAE (e.g., through local credit cards, loans, or cheques), the Credit Bureau's system will be unable to calculate your credit score. In such a case you will not be charged for your request.
If you have a credit history in your home country, depending on the bank, you may be able to provide that instead of a local UAE credit score and report.
Without any credit history, it will be very hard or even impossible to qualify for a mortgage.
In those cases you may just get a small consumer loan - even if you do not need it - and repay it quickly, to build credit. Alternatively, apply for a credit card, use it regularly, and always pay off your credit card bills on time.
Dubai Home Mortgage Downpayment Requirements
According to the UAE central bank regulations, non-UAE citizens need to pay at least 20% down on a mortgage, which is equivalent to a loan-to-value (LTV) rate of 80%. UAE citizens may pay down as little as 15%.
Banks may offer less favorable conditions if you lack good credit history or do not work for a reputable employer.
Dubai Home Mortgage Income Requirements & Maximum Mortgage Amount
Banks restrict the total borrowing amount to a fixed value and/or a multiple of your monthly salary.
For example, Emirates NBD, one of Dubai's largest banks, limits home mortgages for expatriates to AED20mill or 84 monthly salary multiples, whichever is lower.
In addition, mortgages usually come with a minimum monthly income requirement, independent of how big or long your mortgage term is. In the case of Emirates NBD, the minimum income requirement is AED15,000/month.
A monthly salary of AED15,000AED would qualify you for a mortgage of AED1,260,000 based on the bank's 84 monthly salary multiple.
With an 80% loan-to-value ratio this means you could buy a property up to a value of AED1,575,000, with a downpayment of AED315,000.
Dubai Home Mortgage Age Requirements
Anyone above the age of 21 is by law allowed to apply for a home mortgage in the UAE.
There is no legal maximum age for mortgages.
However, while the previous maximum age limit of 65 years was abolished in October 2019 by the UAE central bank, in practice, banks continue to be weary of lending to the elderly.
If you are employed in a company, banks usually require you to pay your last mortgage installment before you turn 65.
If you are self-employed (and can show evidence of sustainable income), banks tend to allow you to pay your last mortgage installment before you turn 70 years old.
Dubai Home Mortgage Interest Rates and Term Lengths
Dubai home mortgage interest rates depend on the underlying UAE central bank rate, the bank you work with, and the mortgage term length.
You will need to decide between a fixed or variable interest rate structure. As of 2023, variable rate loans tend to have a higher interest rate, but offer the opportunity to pay less should inflation, and as a result, central bank interest rates subside in the future.
The longer your mortgage term, the higher the interest rate. In other words, if you get a mortgage for 10 years, you will pay a higher interest rate than for a mortgage with 5 or 3 years.
Every bank offers slightly different interest rates and conditions, so be sure to check out mortgage comparison websites like mortgagefinder.ae.
As of 2023, mortgage rates in the UAE hover around 5%.
Getting a Mortgage on Off-Plan Property
You may get a mortgage on an off-plan real estate investment you are planning to move into upon completion. Mortgages on off-plan property require a minimum downpayment of 50%, meaning you need to wait until you have paid at least 50% of installments to the property developer.
Depending on the developer's payment plan, this means you only apply for a mortgage several years into construction.
Keep in mind that unlike with a regular home mortgage, not all banks are willing to offer mortgages against off-plan real estate. The few that are willing to do so tend to restrict lending to projects built by "master developers" which develop large residential developments including the infrastructure in place. Such developers include Emaar, Nakheel, and Dubai Properties, but exclude many smaller, private developers.
Even then, banks will decide on whether to approve a mortgage on a case-by-case basis only. For example, you will need to provide sufficient evidence that you are able to service the mortgage while paying rent and/or expenses for your primary residence while the off-plan property is still under construction.
Paying Your Dubai Home Mortgage Early
If you are earning or saving more than expected, and decide you want to pay a bit more every month to pay off your mortgage faster - be careful.
First of all, the exact conditions of your mortgage and "overpayment" depend on the bank you work with, as well as the mortgage conditions you negotiate upfront.
Generally speaking, most mortgages do allow for overpayment up to a certain amount without penalty charges. Overpayment beyond the contractually defined limits involves a maximum 1% penalty charge, more on that later.
If you are deciding to overpay, make sure that the money you save in interest as a result is more than any penalty charges and the return you would earn by investing your extra savings elsewhere instead, for example, in the stock market or by buying a second property.
Selling Your Property With a Home Mortgage
Selling your property with an existing mortgage is doable, but involves extra work, prior registration with the Dubai Land Department, and involves extra fees.
When selling a mortgaged property, there are two options. The property's buyer may take over and continue paying the mortgage, or the buyer may pay off the remaining balance of the mortgage in full. Transferring the mortgage over to the new buyer depends on the willingness of the bank to do so, and requires registration with the Dubai Land Department.
Early payment of the remaining mortgage balance will result in a maximum bank penalty of 1% of the remaining balance, or AED10,000, whichever is lower. This relatively low penalty is regulated by the UAE central bank.
Be sure to communicate to any potential buyer upfront that your property is mortgaged, and consider covering the additional costs of terminating the mortgage to make the sale of your property easier. Many property buyers in the UAE do not qualify for mortgages, and as a result, are not interested in dealing with the hassle of acquiring mortgaged real estate.
The entire, detailed process of selling a mortgaged property can be found here.
Conclusion
Due to the complex and often costly nature of home mortgages in the UAE, 70% of home buyers pay for their property investments in cash.
However, with a little bit of planning and knowledge of the market getting a local mortgage is still possible.
We assist potential buyers with independent advice on the Dubai property market, including calculating expected returns on properties. We do not sell real estate and are thus 100% independent advisors. We also specialize in securing your UAE property investments through international estate plans. Check out our services below.
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