August 20, 2024
Buying a property in Dubai can be an exciting as well as a challenging process. The real estate in Dubai is flourishing and has become a fruitful investment. Properties in Dubai can be purchased by cash or by securing a mortgage. There are endless opportunities and visible financial benefits are seen on getting a mortgage. Mortgage allows more flexibility in maintaining financial security. This blog will guide you through the necessary details on getting a mortgage loan and subsequently taking advantage of the process for future investment.
Understanding Loan to Value Ratio
The loan amount an investor can obtain in relation to the value of the property they want to buy or mortgage is determined by the loan-to-value (LTV) ratio. The Central Bank of the UAE has restrictions on the maximum LTV Borrower that can be applied in the country. When obtaining their first mortgage, citizens of the United Arab Emirates are allowed to choose an LTV ratio of up to 80% for properties under AED 5 million and 70% for properties over AED 5 million. Recurring mortgages have a 65% loan-to-value ratio, irrespective of the property's worth. The maximum LTV ratio for an expat is up to 65% of the property value if the property is priced more than AED 5 million, or up to 75% of the value if the property is valued less than AED 5 million. Up to 60% of the property value can be borrowed against in subsequent mortgages. The longest period of time a person can get a mortgage is typically limited to 25 or 30 years.
Eligibility for Getting a Mortgage
Buyers who meet the eligibility requirements can easily obtain a home loan, regardless of whether they want to purchase a townhouse, villa or flat in Dubai. In order to apply for a mortgage in Dubai, buyers must be a citizen or resident of the United Arab Emirates, aged 21–65 and earn AED 25k from self-employment and AED 15K from a salary each month. It is important to keep in mind that depending on the bank, the minimum salary required for a home loan in Dubai can change. Subject primarily to bank policies, some banks permit UAE nationals with a minimum monthly income of AED 10,000 to apply for home loans in Dubai. Non-residents can investigate their mortgage options in Dubai as well. Nevertheless, the fact that so few banks offer house loans to non-resident investors in Dubai limits their options.
Necessary Documents
Buying real estate with a mortgage, one must first apply for one. In Dubai, processing a mortgage application involves paperwork. For an application for a mortgage in Dubai, potential buyer will typically need the following documents, though the specifics can differ slightly between banks:
- A copy of the visa and passport
- A copy of individual Emirates ID
- A salary certificate for proof of employment
- Proof of residence (copy of tenancy contract or DEWA bill)
- Pay slips and bank statements for the past six months
- The latest statements of buyer’s credit cards
- Non- residential need the copy of passport and the bank statement of the past three months in order to apply for a loan.
The Process
Step1: Look for a Lender
In Dubai, bank-sourced home mortgages are required to be registered with the Dubai Land Department (DLD) in order to be considered legally binding. To obtain the greatest mortgage loan in Dubai, buyers have two options: ask your bank directly about their current mortgage offers, or use a broker to do the legwork for them. Mortgage brokers are a great resource for information about available home loans that can be a good fit for buyers as well as their understanding of the local market. This gives up to concentrate on choosing the ideal house rather than becoming bogged down in the lengthy mortgage application process.
Step 02: Selecting the Proper Mortgage
In Dubai, there are various kinds of mortgages. Most of them can be classified as either variable-rate or fixed-rate mortgages. While selecting the kind of home loan that best fits their needs, buyers should take into account a number of factors. These elements consist of, but are not restricted to:
- The kind of property that piqued interest
- The required loan amount
- The amount of cash deposit that can be afforded based on lifestyle and income
People have the facility to enter their variables into the online mortgage calculators offered by most banks to get an estimate of monthly payments under the current home loan interest rate in Dubai.
Step 3: Obtain a Letter of Pre Approval
In order to apply for a mortgage loan in Dubai, the third and possibly most crucial step is to obtain a pre-approval. An official letter from the bank proving the eligibility for home financing is called a Dubai mortgage pre-approval letter. It gives potential buyers a better chance of getting approved for a home loan and specifies their maximum borrowing limit. Normally, a home loan pre-approval letter from a bank takes almost three to five working days.
Step 4: Looking for the Perfect House
Finding the ideal house is now possible that buyers have the pre-approval letter and the budget. Depending on the lender, pre-approval letters are typically good for 60 to 90 days. They have plenty of time to look for the property they want to buy. Sometimes, after locating the home of their dreams, a person applies for a mortgage. This can work, but if it doesn't, they will not be able to get the whole amount of house financing they require to buy the property.
Step 5: Complete the Purchasing of Property
Once the property has been located, get in touch with the bank to complete the loan agreement. In order to help in making a fair offer on the property they want, the bank will designate a property evaluator to determine its worth. Buyers can pay their deposit and choose when the purchase transaction will be completed once the buyer and the seller have reached an agreement on a price. The bank will release the full amount of the loan to the seller on the last day of the property transfer, thereby granting buyers ownership of the property.
The overall process for applying for a mortgage can take about two weeks considering the time taken for the pre-approval letter. It is important to note that only first-time mortgages are eligible for the specified deposits. The minimum down payment on a mortgaged property increases to 40% for foreigners and to 35% for UAE citizens. Getting a home loan is usually the first and the foremost initials of getting a real estate property in Dubai. However, the process is simplified if followed through proper steps. This guide has explained all the necessary knowledge needed in order to purchase a loan. Real estate in Dubai can be facilitated with handsome financial benefits and many worldwide investors are opting to benefit from it.
