Your Guide To Buy to Let Mortgage in Dubai, UAE
Author: Sadiq Suleman
From a regional perspective, the United Arab Emirates (UAE) has become an extremely popular destination for potential expatriates. Recognizing this particular trend, UAE’s mortgage market has now become highly established as local as well as international lenders are providing home loans for expatriates.
As a result, buy-to-let mortgages are easily available for foreign nationals living within the UAE, even though the criteria can vary.
Who can get a mortgage in the UAE?
From a mortgage perspective, UAE nationals and citizens have an option to get a mortgage in the United Arab Emirates (UAE). However, they are required to fulfil a criterion. They are required to be in their current job for at least six months or a year, depending on the area that they are buying the property.
Self-employed borrowers are required to be running their business for at least two years. This could certainly be highly beneficial for having an existing relationship with a bank as they will be highly familiar with your individual circumstances.
One of the biggest twists in this system is that some banks may only be able to accept applicants that can work for particular companies. This also illustrates the fact that if you do work for any government department, bank or a multi-national organization, you will be highly unlikely to have any problem.
It is highly essential to have a clean credit history when you are applying. This is because lenders reject applicants that have a poor or non-existent credit history. As a result, you must not apply for a mortgage until and unless you have checked your credit history.
Buy to let mortgage
From a financial perspective, a buy to let mortgage (btl mortgages) is applicable for those individuals that are buying property as an investment and not as a place to live. If one is planning to make investment in Real Estate through this method, there is certainly no need to finance through a standard method of residential mortgage.
Difference between conventional mortgages & Buy to let mortgages
When compared with residential mortgages, buy to let mortgages are usually provided on a monthly interest basis. This does illustrate the fact that your monthly payments would only help to cover the repayment mortgage or your mortgage interest. However, you are required to pay the full mortgage payment by the end of the loan term.
Buy to let mortgages require a larger deposit when compared with conventional residential mortgages. Buyers of residential property have to pay high rental income, high interest rate and also you have to pay more stamp duty.
Why buy to let mortgage is expensive in UAE?
Buy to let mortgage is expensive when compared with a conventional residential mortgage. This is because buy to let mortgage involves high-interest rates and larger fees when compared with conventional mortgage payment options.
Because that buy to let mortgages are too risky for the lenders. Investors that aim to purchase buy to let mortgages usually expect their monthly payment to be covered by the rental income that they received.
In some months, the mortgage payment could well get delayed with rental income. Your monthly mortgage payment could well cover the high interest rate. However, your monthly mortgage payment will be less when compared with a normal residential mortgage.
Mortgage costs in the UAE
When you have to take out a buy to let mortgage in Dubai, you are required to pay a fee of 0.25% of the balance for the purpose of registering the loan. Your lender also has the option to charge you a particular valuation fee. He may also require you payment of mortgage protection insurance. However, the property may be repossessed by the lender for late mortgage payment.
As of December 2020, mortgage rates start at 2.75% on a one-year fixed rate, 3.88% for three years or 3.98% for five years. These are also some of the lowest rates on the market. Cost of mortgage within the UAE could fluctuate significantly over time. This depends on the economic situation of the country. As a result, individuals looking to purchase residential property may well need to pay considerably more.
Comparing Different Mortgage Rates and Choices
Within the UAE, potential buyers have the option to purchase a residential property in Dubai. Moreover, they also have the luxury to find various Best mortgage solutions that have been provided by various banks as well as real estate investment companies in Dubai.
Potential buyers also have an option to check out various aspects of all these offerings across the UAE. It is essential that you are able to find the residential mortgage that does suit your personal interest perfectly. Here, we will provide a small description of current mortgage rates that have been provided by various banks in UAE:
Some of the most prominent financial institutions providing residential property mortgage in Dubai include:
- HSBC: One of the global banking giants with its head office registered in England, HSBC provides mortgage options to buyers with earnings of at least AED 15,000 a month. Mortgages are only provided on selected developments. Overpayments are allowed. However, they are also subjected to a minimum overpayment of AED 30,000.
- Mashreq: A renowned bank in Dubai, Mashreq provides loans to ex-pats and potential residents in UAE. Home loans are also available for employed as well as self-employed expat residents that earn at least AED 15,000 a month. The maximum loan available is AED 10 million.
- Emirates NBD: Being a Dubai government bank, Emirates NBD offers mortgages of nearly AED 15 million. The Mortgages are provided up to 75% loan-to-value. Moreover, a pre-approval facility is also available.
DAMAC Mortgage offer with ADIB Bank
DAMAC’s properties have created an alliance with Abu Dhabi Islamic Bank (ADIB) for bringing the best possible mortgage deal for potential property buyers looking for buy to let mortgages in UAE. DAMAC’s properties are now available through one of the very best mortgage plans in the country.
Buyers looking for residential mortgages can look for highly attractive aspects in the deal jointly presented by ADIB and DAMAC.
The DAMAC and ADIB alliance provides a very low-interest rate of only 1.99% for 7 years. This also applies to all properties that have been brought by users through DAMAC. The service is also free from any evaluation and processing fee. This also ensures a low cost for the purpose of acquiring a loan to purchase your dream property.
Apart from that, UAE nationals have an option for a mortgage payment that can help them to avail financing for nearly 85% of the property value. However, expats have an option to get loans of nearly 80% of the total property price. The total loan tenure provided is 25 years.
Through the help of these essential features, obtaining a villa or flat in UAE becomes easier than ever. Users can also become owner of a lavish piece of real estate property in very few days without requiring full rental property payment to pay the full price up-front. Users looking to purchase residential property in Dubai can also compare different mortgage rates with a mortgage calculator.
How to apply for a mortgage in Dubai
To apply for a residential mortgage, buyers can either directly approach banks or take financial advice from a mortgage broker. A mortgage broker could well prove to be a great asset for potential expatriate borrowers.
They can help in navigating the fluctuation in the local market. Moreover, they can also help you to find the right deal for your circumstances. Mortgage applications within the UAE are processed within a span of few weeks.
It could also be helpful for obtaining agreement in principle before you are able to make a complete application. An agreement in principle can also involve the bank in providing a basic approval for obtaining a loan in advance of you to find a property in Dubai. It will also allow you for making an offer on a home when you know if it is in your stipulated budget.
Documents to get a mortgage in Dubai
When you are applying for mortgage, the documents that you will require will vary depending on the bank that you are using.
Lenders would be likely to ask you for the following documents:
- A Passport copy
- Residence proof in the UAE as well as proof of your current address;
- Financial documents including bank statements, salary proof of salary and tax return
Home insurance in the UAE
When you are taking out a mortgage in UAE, having home insurance is mandatory. For nationals as well as expatriates, purchasing insurance policies could prove to be very affordable. The total home insurance you will pay will mainly depend on the total value of your residential property in Dubai. Your yearly premium could well be around 0.1% of the combined property value and contents.
Where can I get a custom buy to let mortgage?
A UAE national has the option of buy to let mortgage anywhere in the country. However, non-residents can make freehold and leasehold purchases in designated areas in the UAE including Dubai, Abu Dhabi, Ras Al Khaimah, Sharjah, Ajman and Umm al Quwain. Most of the available property tends to be on a leasehold basis.
What are the criteria for a buy to let mortgage?
Expats can obtain a mortgage from lenders that are operating within the UAE. However, there are also some restrictions for residents. The UAE Mortgage cap requires non-UAE nationals to have cash down payment of a fixed rate of 20% of the total property value (15% for UAE nationals) as well as associated purchase costs, including stamp duty.
Buyers also need to have a few important documents with them including a passport copy, proof of residence in the UAE and proof of current address, financial documents including bank statements, tax return and proof of salary.
Do you need proof of income for buy to let mortgages?
Yes. Individuals looking for buy to let mortgages in UAE have to show financial documents, such as proof of salary, bank statements and tax return.
How much do I have to earn to get a buy to let mortgage?
For the purpose of being eligible for mortgages, expat residents and UAE nationals are required to demonstrate a stable income and also need to have a good credit rating. Minimum salary requirements are usually AED 7,000 for UAE Nationals and AED 15,000 for expatriates.