Buying your dream home is exciting, however, if you are low on budget then home financing can be the right option for you. People who invest for the first time in real estate usually prefer to take out a mortgage to pay off their purchases. Home finances in the UAE come with great financial flexibility, and you can save money for emergencies. In this guide, we will elaborate all about home finances in the UAE, applicable fees, documents and more.
Let’s find out!
Home Financing Law in the UAE
To amend the provision of Law No (13) of 2008, Law No (9) of 2009 came into action. The main foundation of the law is:
- Definitions (Articles 3-6): These articles elaborate on standard terms used in the UAE mortgage law such as a mortgage, mortgagee, and mortgagor.
- Registration of a Mortgage (Article 7): The home mortgage is invalid until it is registered with a land department and any agreement to the contrary is invalid. Also, the mortgagor (property owner) will bear the contract cost unless both parties agreed.
- Mortgage Application Procedure for RERA (Article 8-10): This outlines all the particulars that must be accompanied by a mortgage application.
- Legal Effects of a Mortgage (Articles 10-20): These articles discuss the restrictions and rights of both the mortgagor and the mortgagee during the mortgage period.
- Execution Proceedings on the Mortgaged Property (Articles 25-30): Here you will find instructions about how a mortgagee can take action against the mortgagor if they find any default in the payment.
The UAE Mortgage Cap in the UAE
Besides mortgage laws, potential investors should also know about the UAE mortgage cap before applying for a mortgage. The Mortgage Cap in the UAE was first announced in December 2012.
- The mortgage cap for expats is 75% of the valuation for the first purchase and 80% for UAE nationals
- For expats, a loan of more than AED 5 million will be capped 65% further.
- Those interested in buying a villa in the UAE between AED 5 million to AED 10 million price range need to have almost 50% of its price in cash.
Besides, in the UAE, the rules of buying a property for expats vary from one emirate to another.
Loan-To-Value Ratios in the UAE
Property Type | UAE Nationals | Non-UAE Nationals |
|---|---|---|
| First Property | UAE Nationals Property valued at AED 5 million or Less: LTV = 80% | Non-UAE Nationals Property valued at AED 5 million or Less: LTV = 80% |
| First Property | UAE Nationals Property valued at more than AED 5 million: LTV = 70% | Non-UAE Nationals Property valued at more than AED 5 million: LTV = 65% |
| Subsequent Property | UAE Nationals LTV = 65% (irrespective of the value of the property) | Non-UAE Nationals LTV = 60% (irrespective of the value of the property) |
| Off-plan Property | UAE Nationals LTV = 50% (irrespective of the value of the property) | Non-UAE Nationals LTV = 50% (irrespective of the value of the property) |
The Central Bank of the UAE issued a new set of mortgage lending regulations to banks and other financial institutions in October 2013. The loan-to-value or LTV ratio set by mortgage regulations is
Note: It is important to note here that as per the Central bank laws, not more than 50% of your total income should be used to pay debts and mortgages in the UAE. Hence, loan providers and banks should calculate the Debt Burden Ratio (DBR) for this purpose. Also, you are advised to plan your home finance carefully before you apply for a mortgage.
What is the Maximum term of home finances in the UAE
According to the law, the maximum home financing eligibility in the UAE is set at 25 years and the maximum age limit of a borrower is to be 70 years for UAE nationals and 65 for non-UAE nationals – until the date of the last loan repayment is due.
Additionally, the maximum home financing amount for UAE nationals should be eight times their annual income. Whereas for non-UAE nationals, the amount is seven times their annual income.
The required monthly income to get a home loan in the UAE is at least AED 15,000 if a borrower is salaried and AED 25,000 if they are self-employed.
Documents Required for Home Finances in the UAE
Here is a list of documents required for financing your home in the UAE:
- Original/copy of Emirates ID
- A copy of the visa and passport
- Salary certificate
- Pay slips for the last six months
- Proof of residence (DEWA bills or tenancy contract)
- Last statements of credit car
If you are a non-resident, you need the following documents:
- Passport copy
- Evidence of legal residence in Dubai
- Proof of your salary or bank statements for the past three months
- Documents that prove the affordability of the mortgage,
However, you must check if your financing bank requires other documents based on its policy.
Interest rates to Finance a Home in the UAE
There are two types of mortgages regarding payment rates:
Fixed Rate Mortgages
Fixed-rate mortgages come with a fixed interest rate. This rate is decided before signing the mortgage contract. A fixed-rate mortgage is generally offered for less than 5 years. However, some banks might offer a fixed interest rate for the entire loan tenure. The advantages are:
- You can have a clear budget to plan since the interest amount is fixed.
- Your interest rate will be locked and won’t increase any further.
Variable Rate Mortgages
Unlike fixed rates, a variable interest rate is dependent on market factors and Emirates Interbank Offered Rate (EIBOR). It can fluctuate anytime during the loan tenure. The type of interest is beneficial for those who have got enough financial liquidity to deal with the EIBOR fluctuations. This works if:
- Interest rates might stabilise or fall.
- You have got enough financial stability to handle changing mortgage rates.
With this, we conclude our guide on all about home finances in the UAE. In the past few years, the UAE property market experienced major developments making the buying procedure hassle-free. The state introduced new real estate laws, initiatives and projects where more and more people could find investment opportunities.
Buying a home by paying cash is also a financing option for buying a home for many. If you are confused between cash or mortgage for buying a house in the UAE, give this guide a read.
Since you know about UAE mortgage laws, if you are interested in buying properties in the UAE, check the list. You can find several investment options in the city such as
- Houses for sale in the UAE
- Apartments for sale in the UAE
- Lands for sale in the UAE
- Commercial properties for sale in the UAE
Stay in touch with the UAE’s top property blog to know further about the real estate investment opportunities in the country.
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