House Financing Solutions in UAE – What Is the Best Choice for You?

Tue, 12 Jan, 2021

About House Financing

Every individual must have wondered about owning a home and getting rid of the monthly or annual burden of rents. But as many are not aware of the ins and outs of the property industry, they either drop the idea or consider it too far-fetched for themselves.

Contrary to what many people think, owning a house in a luxurious locality in UAE is not a difficult thing to do; what you need is the right guidance and the courage to make some bold decisions.

There are numerous ways of owning a property, which includes getting it financed by banks or other entities. Whatever path you follow, you will be able to open many avenues of luxurious living, monetary benefits, and financial perks of firm equity.

Considering the benefits, the cost in terms of effort and money seems very minute. And coupled with the option of getting financial support, makes it an opportunity too good to miss.

Types of House Financing

In the UAE, house financing is within everyone’s reach due to flexible terms and legalities. You can choose from several notable financial institutions to get a loan for your property. As every bank offers a different combination of interest rate, loan term, and LTV ratio for any given profile, it is always advisable to do good research before deciding on one of them.

Who Should Apply

House financing is ideal for anyone who has a good monthly income, whether through a job or a private business. The key is to be able to repay the loan amount according to the schedule and also pass the eligibility criteria set by the banks. So anyone willing to own a property in Dubai or anywhere in the UAE should consider applying for a home loan.

House Financing Tips in Dubai

Here are a few tips for house financing in Dubai:

Get a lender

You can approach your bank to inquire about the available deals on a mortgage or hire a broker to find the best deal available for you.

Select the right mortgage

There are two types of mortgages in Dubai – fixed rate and variable rate. A fixed rate mortgage is the one where the rate of interest on the loan remains fixed for the complete term. A variable rate mortgage charges an interest rate based on the outstanding balance that does not remain constant.

Get a Pre-Approval Letter

This is perhaps the most important step while applying for a mortgage for house financing. A pre-approval letter is an official document that proves your eligibility for financing a house.

Finalize the purchase

Find your dream home and negotiate a fair price with the seller. Once you settle on a price, you can pay an initial deposit. You will officially become the owner of the property.

House Financing for First Time Buyers

Applying for a mortgage is an essential step for first-time buyers for their new home. Taking the time to research the available options can save you a significant amount of money and time. One of the key factors to consider is understanding the market where the house is located and the incentives it offers. By factoring in these incentives, you can easily figure out what mortgage would suit you best.

House Financing for Existing Home Owners

A second mortgage is taken out on a property that a person already has. In simpler words, it is a new mortgage for existing homeowners while the first mortgage is still in full effect. There are two main factors that should be considered for a second mortgage:

  • The home should have equity
  • The person who owns the home

In-House Financing vs. Bank Financing

As it is established that buying a property through a loan is a great idea, now is the time you should look at the options available. The most basic choice you need to make is whether to go for bank financing or in-house financing.

Both are similar as far as the final result is concerned, as both will enable you to buy a property without having to pay the full price upfront. But as we go into details, we will see multiple differences in these financing options, which greatly impact the overall benefit you can take out from your loan.

In-house financing is simply the financial assistance offered by the seller, in our case, the property developer. DAMAC is the market leader in UAE’s real estate industry and offers first-rate in-house financing solutions for its customers. There are other companies also offering a similar convenience for the buyers, allowing them to enjoy greater benefits.

Benefits of In-House Financing

In-house financing trumps bank financing in many ways. The developers offer greater benefits compared to the banks, which bring them more customers and hence a good return on their investment. Major advantages of in-house financing over bank financing include:

  • Having to deal with the seller only
  • Greater flexibility in payment schedules
  • Quicker processing time
  • Lesser paperwork

These are general benefits that are prevalent in every industry and business sector. The property market has its own distinct set of benefits for the seller and buyer, which we will discuss in detail in this piece.

What Can a Finance House Offer?

A finance house in Dubai or a developer offering financing options has a lot to offer to the customers. The customer is provided with several property choices that match well with the profile. After selection, the property is offered to the customer with a certain down payment amount and payment schedule.

As the property developers manage to boost their sales through this practice, they pass this benefit down to their customers to make it even more convenient for them.

Understanding Benefits for Both Sides

Just like every other business deal or practice, in-house financing has something for everyone. The property developers offer the service either solely or in collaboration with a financial institution. For instance, DAMAC Mortgage Assist is brought to you in collaboration with ADIB, which is one of the most trusted and credible banks in the country. Let’s get straight to the benefits to understand what is there to gain.

Benefits for Lender

Real-estate companies strive to bring the greatest benefits for their customers, especially the most credible ones like DAMAC. But there are certain advantages for themselves as well, which as a buyer, you must know to understand the practice better and make good use of it.

It brings them a greater return, as they can accumulate greater profits by offering deferred payment solutions. Even though they keep a lesser profit rate in comparison to the interest charged by banks, they can still gain a lot by offering this service.

Involving a bank generally increases complexities and formalities for the sellers also. They have to go through additional processes and paperwork just for this purpose. But when they offer their own assistance, this extra effort is reduced, and hence, makes things more favourable.

The buyers are also attracted more to properties that come with in-house financing solutions. So just by offering the service, the developers are able to increase their properties’ demand substantially.

Benefits for Receiver

In-house financing is even more beneficial for the receivers of loans or buyers. They can save a great amount of money as the cost of finance and also get their favourite properties with greater convenience. Let’s discuss some of the advantages one can expect by opting for in-house finance.

Firstly, and most importantly, in-house financing brings more attractive interest rates, which allow customers to make greater purchases and also save a lot of money in servicing the loan. In-house financing can also be useful in buying more than one property, which is not possible through a bank loan.

In comparison to banks, there is lesser paperwork and formal processes required. Just provide the proof of income to the financers and keep up with government regulations, and you will be ready to go.

In-house financing generally has fixed interest rates over a period of time, allowing you to plan better for paying off your loan. Moreover, you are likely to get better LTV ratios and greater loan terms as well. But all this depends on the financing entity and can vary.

In-House Finance for Properties

UAE is the hub of trade and commerce in the Middle East, so its real estate industry has soared accordingly. By purchasing a property here, you can be sure of the best returns on your investment if you wish to buy in for non-residential reasons. If the sole purpose is to find a good home for your family, you will find the most luxurious choices here.

Be it for a residential or commercial purpose, buying a property becomes much easier and beneficial if acquired through a loan. And if it is through in-house finance, the advantages increase manifold, as discussed above.

For Residence

Living in Dubai, Abu Dhabi, Sharjah, or any other city in the UAE is a dream for many. This brings a lot of ex-pats who live and work in the country and enjoy its multicultural environment and commercial prowess.

To take it a notch higher, you can purchase a property here and enjoy a lot of additional advantages that include escape from rental payments, benefits of equity release, and also the ease of extended legal stay in the country.

One might think of the high prices of property and drop this idea and all of its advantages. But with in-house financing options offered, purchasing a high-end property in UAE has become easier than it ever was. So ex-pats can grab this opportunity and get their hands on their favourite real estate projects with immense convenience.

Finance Companies in Dubai

Being a thriving city, Dubai has a very vibrant and helpful network of banks and financial institutions. These include government-backed institutions and also private ones.

But given the nature of commerce in Dubai, they all offer very attractive financing choices for customers in terms of business, personal, property, and other loans. You can turn the dream of your home in Dubai into reality, and that too in a quick time by availing of home loans from finance companies in Dubai.

For anyone living as a tenant in UAE, this brings a great opportunity of owning a property, which ensures a lot of monetary benefits. The way the property market is rising, the cost of acquiring a property, through a financing tool or otherwise, will get costlier as time goes by. This also means that by acting quickly, one can be sure of getting a huge return in the future.

Best Mortgage Rate

When you have such a progressive financial industry, it comes with the benefit of having a lot of options. Different banks and in-house financers bring you a huge range of options with different mortgage rates, variable or fixed rates, loan terms, eligibility criteria, processing methods, and other factors.

Though it is a luxury to have multiple choices, it also means that you need to make a calculated choice, so you don’t miss out on a great opportunity.

The most important factor of comparison between different offerings is the mortgage rate, which is practically your cost of acquiring financial assistance. So when comparing options, the mortgage rate should be the first thing to look at before applying for a loan. Let’s take a look at the mortgage rates in UAE and other aspects that differentiate financial institutions and their offerings.

Required Documents

  • Latest credit card statements for house financing
  • Proof of employment certificate or salary slip
  • Copy of your passport and visa
  • Bank statement of the past six months
  • Proof of residence
  • Copy of your Emirates ID

Mortgage rates in UAE (Islamic house financing)

 

Bank

Rate

 

Minimum Salary/ Earning Requirement

 

Maximum Loan Amount

 

Standard Chartered Mortgage One

 

3.55%

 

AED 10,000

 

AED 18,000,000

 

CBD Mortgage Loan for Ex-pats

3.64%

 

AED 12,000

 

AED 10,000,000

 

Commercial Bank of Dubai Mortgage Loan for Businessmen

3.64%

 

AED 20,000

 

AED 10,000,000

ADIB Home Finance (Islamic)

 

3.75%

 

AED 10,000

 

AED 15,000,000

 

Emirates Islamic Manzili Home Finance (Islamic)

 

3.19%

 

AED 15,000

 

AED 20,000,000

 

FAB Mortgage Loan

 

2.99%

 

AED 15,000

 

AED 20,000,000

 

RAKBANK Home in One Loan

 

3.24%

 

AED 15,000

 

AED 20,000,000

 

United Arab Bank Home Finance

 

3.69%

 

AED 15,000

 

AED 10,000,000

 

United Arab Bank Home Finance for Businessmen

 

3.69%

 

AED 50,000

 

AED 10,000,000

 

DIB Home Finance (Islamic)

 

3.24%

 

AED 12,000

 

AED 50,000,000

 

The interest in UAE is generally charged on the reducing rate basis, which means that the debtor has to pay interest on the outstanding amount only, not on the total principal amount.

For instance, once you reach the halfway mark of your loan term and have substantially paid the principal amount back, you will be paying a lesser interest in your monthly payments as the outstanding amount is now much less than what it was at the beginning of the term.

How Does Adjustable Rate Mortgage Work?

An adjustable-rate mortgage is a type of loan with a varying interest rate. It usually starts with lower monthly payments compared to fixed-rate mortgages. However, the monthly payment may change. It is also known as tracker mortgage or variable rate mortgage.

Private Mortgage Insurance (PMI)

Private mortgage insurance is a type of insurance policy that you may have to pay for in case you obtained a conventional loan. PMI provides protection to the lender, not the buyer, like any other mortgage insurance policy.

Commercial Property Finance

Commercial property financing is a facility that supports the finances for acquiring an industrial or commercial property, which is still under construction or has already been completed.

DAMAC Mortgage Assist

UAE is one of those countries where you have to bear a low cost for acquiring a property loan. All the interest rates mentioned above are very attractive by international standards and come with very encouraging terms and criteria. To get an even better deal, you have to look for properties on which you can avail in-house financing.

So when you moved on to looking for properties instead of banks, the confusion is less, and choices are much simpler. With DAMAC’s projects being in contention, you are bound to take a look at them first as they are known for their finesse and quality housing. The even better news for you is that DAMAC offers a financing service of its own named DAMAC Mortgage Assist.

DAMAC Mortgage Assist is brought to you in collaboration with ADIB, a leading financial institution, to enable you to buy the best properties in Dubai with the barest of costs. The usual interest rates offered by banks in the UAE range between 2.99% and 3.75%.

But with DAMAC Mortgage Assist, you get an astonishingly low-interest rate of just 1.9%. Finding such a mortgage rate is a pleasant surprise, but knowing more about the offer and process will increase your delight even more. Let’s take a look at some of the most important aspects of DAMAC’s offer.

Interest Rate: 1.9% (Fixed for 7 years)

Loan Term: 25 Years Maximum

LTV Ratio: Up to 85% for UAE Nationals and up to 80% for Expats ( non resident )

Just by looking at these numbers, one can be sure that it is the best deal and too good to miss. Along with these, there are some other attractive aspects that make getting an in-house loan from DAMAC a highly attractive and convenient prospect.

With a team of experienced individuals, DAMAC ensures maximum comfort and ease for the customers, who not only get the best financing deal but also get it for a property that scores high on every facet of luxury. Here are some points that characterize DAMAC Mortgage Assist:

  • Quickest processing time, with approvals given within 72 hours (Working Days).
  • Lowest paperwork, as you are directly dealing with DAMAC.
  • Exemplary support and consultancy, as our experts, can find the best set of properties for you.

With these aspects, there is not much more one can wish for to own a property in Dubai or elsewhere in UAE. You can also contact for understanding the process and getting an estimation of the maximum loan amount for your profile, loan terms, and expected EMI. You can also calculate EMI by yourself by using the mortgage calculator.

Calculating EMI

Estimating EMI manually can be a daunting task, as it involved advanced calculations with respect to decreasing outstanding amounts.

But that is not a reason to worry, you can easily get an idea of the EMI you have to pay for any given property using DAMAC’s mortgage calculator or any other EMI calculator you can find online.

This will help you get aware of the most important factor in acquiring property through in-house finance and make the decision accordingly.

Using an EMI Calculator

If you simply search for the term EMI calculator UAE or mortgage calculator on the web, you will get a lot of results instantly. You can simply take a look at the first few, see what input they require and what results they give out. Choose the one that solves your ambiguity the best.

For newbies, DAMAC’s Mortgage Calculator is the best choice as it is easy to use, doesn’t require a lot of input, and provides you with the EMI you have to pay for any given property price. Here are the steps for using a mortgage calculator:

  • Go to the mortgage calculator page.
  • Enter details like property price, down payment percentage, interest rate, and loan period.
  • Instantly, you will get to know the down payment and monthly EMI along with other costs related to processing and government fees.

You can check the results for different property prices within seconds, allowing you to make up your mind about the price range you should go for.

How to Apply?

Applying for in-house finance is fairly simple, especially in comparison to bank finance. There are just a very few steps on the part of the buyer, or as we can say, the loan applicant, while the rest is to be taken care of by the lender. Let’s take a look at the general process that is followed for in-house property loans, though it can differ slightly depending on the lender.

  • Contact the property developer that is offering in-house finance.
  • Provide you income details and the required documents.
  • Wait for the approval, after which you will be given a range of property choices matching your loan amount.
  • Select the property, finalize the loan term and provide other documents if required.
  • Pay the initial amount to finalize the process.

The lenders generally take care of all the government processes, including RERA Registration. So the buyers can simply sit back as the process is complete and get ready to take ownership of their favourite property.

Things to Know

There are several aspects related to property loans and financing plans which are usually not known. As a buyer, you need to look in the details about the process and choices so can get to the best conclusion.

Mortgage Types

You will find different home or mortgage loan types in the UAE. They differ mainly on the interest rate and calculation of EMI. So whether the loan you are getting follows a variable, capped, or fixed rate can determine how much interest you will pay by the end of your loan tenure.

Each mortgage type has its own merits and can be more useful to some buyers than the rest, so you should learn about these before making the final choice.

Legalities

A buyer needs to be aware of the legal processes and requirements before applying for a house loan. The lenders can be very helpful in this regard, as they are aware of all the necessities and communicate them to those interested in buying the property. One can also take help from the lawyers and consultants to know of the documents needed and get them ready beforehand.

Property Choices

The next important thing has got to do with selecting properties to invest in. There are specific areas that allow freehold ownership, which means ex-pats can easily own a property in those vicinities. So before finding suitable properties, you should mark the areas first to avoid any complications or trouble later in the process.

Conclusion

House financing is the ideal way of buying a property in the UAE. It allows you to increase your reach as a buyer, as you don’t have to rely on your present wealth for it.

With a lot of options and services, it has become very easy for everyone to buy a property in the country and enjoy the many benefits that come with it. But as is always the case with every big decision, good research and careful approach can help reduce the costs and maximize the benefits.

Frequently Asked Questions

Which is better – bank financing or in-house financing?

Both financing types have their benefits for the buyers, but generally, if a property comes with an in-house financing option, you are better off using it as compared to involving a bank. In-house financing brings lower interest rates, quicker processing, less paperwork, and several other advantages in comparison to bank financing.

Does in house-financing homes check your credit?

In-house financing is usually very safe for the lender, so property developers usually ignore the credit history of the buyer. As buyers, you simply can contact the property developer to know about this to be sure about it, as some lenders can also choose to check it before sanctioning a loan.

What are some housing loan companies?

In the UAE, you can find a lot of housing loan companies which include banks and property developers. Among banks, ADIB has a good reputation and easier processes, while DAMAC leads the way among the real estate companies. Incidentally, both have combined to bring you the best housing loans for buying some of the best properties in UAE via DAMAC Mortgage Assist.

What are the home loan rates in Dubai?

You can find varying home loan rates in Dubai. If you are looking at the banks, you can expect to get interest rates somewhere between 2.99% and 3.6%. The rates are lesser with the in-housing financing service offered by real estate companies. With DAMAC Mortgage Assist, you can get a home loan rate of 1.99%, which is considerably lower than offered by banks and other companies.

What is a Housing Loan?

A housing loan is a financial assistance offered by a bank or any other company to buy a property. Housing loans are also called home loans, mortgage loans, and property loans. In this loan, the applicant can get the finance for buying a property, which is up to 80-85% of the total property price and has to be paid back through an agreed-upon installment plan, which goes on till the end of the loan term.

What are the mortgage loan interest rates?

Interest is the additional amount charged by the bank for providing the finance. The rate at which it is charged is called the mortgage loan interest rate. Different banks offer different interest rates, so you can pick the one which is most suitable for you, which has to be the lowest.

How to get an interest-free home loan?

Home loans always come with interest, as no bank or company can provide finance without a cost. But you can always look for the lowest interest rate from the choices. If you are looking to buy a property in a DAMAC project, DAMAC Mortgage Assist is your best option as it offers a rate of just 1.99%, which is way below the market average.

How are mortgage interest rates calculated?

Interest rate calculation is a very complex process, and it depends on its method of calculation. Usually, the banks and companies use the reducing rate model, in which the interest is only applied to the outstanding principal amount. Without bothering yourself with complex formulae and methods, you can simply use a mortgage calculator online to calculate interest.