Top 10 Things You Should Know When Taking a Home Loan

Dubai is one of the fastest-growing cities in the world, and it welcomes everyone from across the world to buy a home with a promise of better living. Whether a national or a resident, if you wish to buy a home in Dubai, here’s all you should know about the real estate financing facility that banks provide.

1. Eligibility criteria: Getting a home loan in Dubai is fairly easy if you meet the eligibility criteria. You are eligible if your age is between 21 and 65 years and your monthly income is above AED 10,000 (for salaried individuals) and AED 25,000 (for self-employed individuals).
2. Borrowing limits: For properties that cost less than AED 5 million, expats, who are first-time buyers can borrow up to 80 percent of their property value and UAE nationals may borrow up to 85 percent of the property value in a loan. However, if the property cost is more than AED 5 million, the borrowing limit decreases to 70 percent for expats and 75 percent for UAE nationals.
3. Down payments or deposits: Given the borrowing limit, expats are expected to put down a deposit of 20 percent for a property that costs less than AED 5 million and 30 percent if the property costs more than AED 5 million. For UAE nationals, the deposit percentage stands at 10 percent and 25 percent respectively. Some Banks can also finance the associated fees of the transaction, i.e. DLD fee and real estate broker commission.
4. If you wish to purchase a property in Dubai and apply for a home loan, you will need to submit the below paperwork.

• For UAE residents:You will need a passport, a residency visa and Emirates ID, the latest salary certificate, the latest 6 month payslips, andthe latest 6 months’bank statements for your personal account,
• For UAE nationals:You will need a passport copy, financial documents, such as proof of salary, bank statements for the last 6 months, as well as a national ID/family book.

5. Mortgage pre-approval: You must obtain a mortgage pre-approval before you start looking for a property. This is crucial and can help you narrow down your search as per your eligibility. If you don’t have a pre-approval and the bank refuses to finance you after you have signed a contract, you could lose the deposit money for the transaction. Normally, it takes up to three to five working days (for a salaried individual) to get a home loan pre-approval letter from the bank and is mostly valid for 60 to 90 days, depending on the lender. Pre-approval timelines for self-employed individuals vary depending on the type of business activity and other factors like length of business, etc.
6. Mortgage duration: The maximum loan period allowed in the UAE is twenty-five years, with an age limit of 65 years for salaried people and 70 years for self-employed. The long-term loan helps you reduce your monthly cash outflow and helps increase your borrowing capacity.
7. Repayment: Bank’s repayment plan is largely dependent on your monthly income. For all cases, the maximum repayment is based on the debt-burden ratiofor an individual. If you have other loans (car loans or any other repayments to the banks), that amount is also considered as part of your liabilities. However, borrowing capacity varies for different people since banks follow different formulae to calculate the borrowing capacity of an individual.
8. Property insurance: Buildings insurance is mandatory when taking out a mortgage. Insurance policies in the UAE can be very affordable, and you can either purchase buildings and contents insurance separately or as a package.
9. Home loan rates in Dubai: The interest rates for home loans in Dubai are generally in line with the US and vary as per the market conditions. You can opt for a fixed rate up to 5 years. After that, the follow-on rate will be a variable rate based on the EIBOR. You may also consider variable interest rate mortgages, but it is best to consult your mortgage advisor for the most suitable options.
10. Refinancing your mortgage: Due to stiff competition in the mortgage market in the UAE, the banks strive to offer discounted pricing on their buyout products. If you have an existing mortgage and are looking at switching mortgage providers, this might help you get better offers. Banks may consider restructuring your loan to provide you with competitive home loan rates. There are multiple fees to consider while switching a mortgage, and it is best to check with your mortgage broker to see which of these can be waived or absorbed by the buyout Bank.

Buying a house is one of the most important decisions and a mortgage broker in Dubai can help you with advice and information that you would need to get the best option with the lowest home loan interest rates and other fees involved.

Finance Lab is one of the leading and top-rated mortgage consultants in Dubai. We tailor mortgage and home loan solutions to your personal needs to provide you with only the best interest rates in the UAE. For inquiries, reach out to us at contact@financelab.ae or +971 55 5764680.