10 Tips on How to Secure a Mortgage in Dubai for Expats in 2022?

Mortgage

The housing market in Dubai is booming, and so are the prices. With the increase in demand for property, it has become difficult for expatriates to find a home that fits their budget.

Mortgage rates are low, and property is abundant in Dubai. However, the high cost of living makes it difficult for expats to secure a mortgage. Here are 10 tips on securing your dream residence in 2022.

1.    Search for a Lender

Home mortgages in Dubai are obtained through banks and must be registered with the Dubai Land Department (DLD) to be legally recognized. You can approach your bank directly for potential mortgage deals or employ a broker to work on your behalf to obtain the finest mortgage loan in Dubai.

There are more than 30 lending institutes in Dubai. However, some won’t give loans to foreigners or non-residents. Only foreign lenders approved by the central bank are permitted to conduct business in the UAE.

A mortgage cannot be registered against the title deed of a property by an unrecognized party, which implies that the bank wouldn’t be allowed to confiscate the property in the event of a borrower default.

Mortgage brokers have essential information about the local market and accessible home loans that may suit you, which helps you concentrate on locating the ideal property rather than being entangled and lost in the mortgage procedure.

2.    Make a down payment

A downpayment is one of the most significant upfront fees of a mortgage. It’s a good-faith deposit.

According to the UAE Mortgage Cap Law, foreigners must put 20% of the property’s worth in cash, whereas UAE citizens must only put 15% of the purchase price. The payment increases by 30% for properties costing more than AED 5 million and 40% for second or third-time buyers.

You must pay 7% of the property’s worth in up-front charges in addition to your 20% down payment, which depletes your savings and reduces the amount you have available for the down payment. 

Your money and investments will come in handy here. So, acquire a firm handle on your finances and determine where you’ll receive this money. It is crucial to smartly secure your budget or contact a broker who can help you manage your finances in the best possible way.

Relevant: Can Expats Buy OFF Plan Property on Mortgage in Dubai?

3.    Choose the most Suitable Mortgage

Suitable Mortgage

In Dubai, there are various sorts of mortgages. They are typically classified as fixed-rate or variable-rate mortgages. When selecting what form of house loan is best for your situation, there are various aspects to consider. These include, but are not limited to:

  • Your lifestyle
  • The sort of property you wish to purchase
  • The loan amount required
  • The amount of cash you can afford to put
  • Most banks feature online mortgage calculators that you can use to estimate your monthly payments based on the applicable home loan interest rate in Dubai.

4.  Prepare the Documents

Obtaining a mortgage necessitates the completion of documentation. There’s a lot of it! Maintain your organization and make sure you have everything ready. A copy of your passport, visa, Emirates ID, salary certificate, trade license for self-employed individuals, and bank statements are required. Some may require further documentation to establish employment, income sources, and liabilities.

Relevant: Getting a Mortgage to Purchase a Property in Dubai is Good Decision?

5.  Evaluate Your Finances

Banks do credit checks to determine the type of borrower you are and will be. Your credit score reflects how you manage your finances. A long history of prudent credit use is beneficial to your credit rating. Missed payments, mortgage defaults, and bankruptcy can all be considered red flags.

The Al Etihad Credit Bureau (AECB) is in charge of issuing credit reports in the UAE. Check your credit score on their official website to get a jump start.

6.  Improve your borrowing power

On average, banks will lend no more than 25% of your monthly salary. Keep an eye on your outstanding debts. Credit cards, personal loans, vehicle loans, leasing agreements, and other continuing financial commitments are all examples. Your disposable income is all you have left. Banks use this to determine how much you can afford to repay.

7.    Take into Account Tenure and Fees.

The maximum payback time in the UAE is 25 years. The interest rate is essential when shopping for the best mortgage.

A longer lease is less expensive each month. However, you pay more in total because of the higher interest rate over an extended period. In contrast, while a shorter tenure costs more, you pay less overall due to lower interest rates.

Also, consider factors other than interest. Be wary of setup, conveyancing, and penalty fees.

Online Approval: Get pre-approved for a mortgage

8.  Get a Mortgage Pre-Approval Letter

A crucial step in the overall mortgage application process is obtaining a letter of pre-approval for a mortgage. Typically, a mortgage pre-approval letter is sent out in 3-5 business days. 

A formal letter from your preferred lender confirming your eligibility for a mortgage is known as a pre-approval letter. This letter confirms that you will be granted approval for a mortgage and specifies the maximum amount you can borrow.

A mortgage pre-approval is a lender’s promise to give you a house loan up to a specific amount and validates your eligibility. Make sure you satisfy the lender’s requirements to receive a mortgage pre-approval.

9.  Find Your Ideal Home

ideal home

It’s time to start looking for the right property now that you have a budget and a pre-approval letter. You can choose from an extensive collection of opulent apartments and luxury villas for sale in Dubai. Depending on the lender, pre-approval letters are usually good for 60 to 90 days, giving you plenty of time to look for the house you want.

People will sometimes look for an ideal property first and then apply for a mortgage. It may work, but you may only be able to obtain some of the home financing required to purchase apartments or luxury villas for sale in Dubai.

You can contact a professional broker in Dubai, like Next Level Real Estate, to help you find the best residence that fits your preferences. An experienced agency saves you the time and money to buy a suitable property in Dubai. 

Relevant: How to get Bank Loan to Buy a Home in Dubai 

10. Finalize Your Property Purchase

After you’ve found the perfect home, contact your bank to finalize the loan agreement. The bank may send a property evaluator to assess the value of your preferred property and assist you in making a competitive offer.

Once you and the seller have agreed on a price, you can pay your deposit and schedule a completion date for the purchase transaction. The bank will release your loan money to the seller on the last day of the property transfer, making you the property owner.

What are the conditions for obtaining a mortgage in Dubai?

As long as you can prove your income, almost anyone can obtain a mortgage in the UAE. Numerous forms of revenue are available, including salaries, commissions, and rental income. Contact one of Next Level’s expert mortgage brokers to discuss your situation.

Why are mortgage-backed securities?

No one is legally required to force a financial institution to create new loans, no investor is required to buy an MBS, and no borrower is forced to take out a home loan. The MBS allows borrowers to purchase homes through free contracts, allows banks to lower risk, and allows investors to seek a return.

According to The National News, the Dubai International Financial Centre (DIFC) established a new UAE mortgage-backed bond market, and investors are hopeful that it could help the country’s thriving real estate sector.

Which insurance policies will I be required to purchase with a mortgage?

Any bank will demand a buyer to have real estate and life insurance if they want to obtain a mortgage. If the borrower should suffer a loss, the bank will be reimbursed for all insurance proceeds, and the deceased person’s family will be permitted to use the property securely.

What are the extra costs associated with buying a house with a mortgage?

  • Bank Mortgage Arrangement Fee – 1% of the loan amount + 5% VAT
  • Property Valuation Fee – Between AED 2,500 – AED 3,500 + 5% VAT

Buyers who finance their purchase must pay the costs mentioned above to the bank. Several banks permit buyers to include these upfront costs in their mortgages to relieve the strain of the first financial outlay.

What are the short-term and long-term mortgage options in Dubai?

In the UAE, mortgages are offered with fixed or variable interest rates. Although they might be as short as one year, fixed durations are often five years or longer. The agreement switches to the bank’s variable rate after the fixed period.

Although variable-rate mortgages are worth considering if interest rates appear to be falling, fixed-rate mortgages give you certainty about the size of your repayments for a predetermined period. The borrower must generally return the loan before age 70, and the terms are typically 25 years long.

What if I failed to pay my mortgage on time?

If you stop paying your mortgage installments, the bank will start charging you extra fees and interest for a spell (between three and six months) while they contact you and request payment.

If you don’t pay, they will send the file to their collection and legal departments until the property is fully forfeited.

After that, the bank can do whatever they like with the property to recoup its loan plus fines, interest, and legal costs.

 

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