Best Home Loan Interest Rates in Dubai & UAE for Expats 2021
Getting a home loan in Dubai for expats and nationals is an essential aspect when purchasing villas or apartments in Dubai. If you consider the significant number of expatriates currently living or who are interested in living in the UAE in the future, they may require a home that is suitable for their personal taste and fits their individual financial goals.
Due to the fact that several people are looking to get a home loan in UAE, we have put forward a comprehensive and detailed list of data that can guide you on how to get loans for purchasing a home in Dubai.
Guidelines For Expatriates To Obtain Home Loans In Dubai
Within the UAE, financial institutions are required to adhere to a specific criterion to provide loans for homes in Dubai. These include:
- Credit history
- Length of employment in UAE
- Time spent within the UAE (Usually from 6 to 12 months)
- Total business period in UAE (Usually 3 years)
Pre-Requisites For Purchasing Home Loans In Dubai
As an individual may expect, mortgages and home loans are relatively common in Dubai and several clear rules have been elaborated by the central bank of UAE. For expats, home loans in Dubai have been provided on specific conditions.
The initial step in this important process is finding out the amount of money you are required for to pay upfront. Apart from that, you are required to have an idea of the duration of mortgage as well as whether you require a fixed or variable interest. These essential elements need to be considered by any expat who is looking to find mortgages in Dubai.
Initial Payment Required
From a financial perspective, there are few payments that expats have to pay for obtaining loan for residential purposes in UAE.
- You have to pay a nearly 25% of the overall purchase price being a down payment (this is usually for properties that are less than AED 5 million).
- 25% of the mortgage registration fee
- 4% transfer fee, Valuation fee (nearly AED 3,000)
- 2% commission for real estate.
Prior Approval For A Mortgage
For individuals who are looking to purchase a home within the UAE, it is essential to get prior mortgage approval. This will help to provide you an accurate confirmation regarding your total budget, which is pivotal since it will allow you to search for a property that you can afford.
Apart from that, whenever you have to sign an agreement for sale of the property, you may need to provide a signed cheque. This should be nearly 10% of the property’s purchase price. However, if you have not obtained financial approval, you may well lose the bank’s deposit money.
The Clause of Valuation In The Sales Agreement
You have to make sure your agreement does have a clause for property valuation. Before your financial institution offers you any loan, they would be conducting a valuation of your property. In some cases, the valuation may result in a figure than the actual purchase price of the property.
This means your banker or lender will not lend you the amount that you need to purchase the property. To protect yourself from this type of down valuation, you can set a clause in the memorandum of understanding that states you are not obligated to complete the purchase process of the property in case the bank down values it.
This clause will provide you with enough leverage that will allow you to renegotiate with the bank, and in case the bank does not offer a reasonable financing deal, gives you the freedom to walk away.
Using Home Mortgage Loan In UAE
Mortgage financing is one of the easiest and most convenient options for purchasing a desirable property in the UAE. Mortgage financing can allow individuals in the UAE to acquire real estate properties without payment of the full property price at once.
Individuals can obtain debt financing from a financial institution or real estate organization to purchase a property and make a payment through a convenient schedule of payment. A processing fee may also be charged.
Mortgage Types Offered In The UAE
There are different types of mortgage loan provided in the UAE with regards to various types of interest calculation.
The most important component in this regard is the down payment, which is a small percentage of the value of property, which is required to be paid upfront. The rest of the price of the property can be paid by means of easy monthly installments (EMI).
We will now evaluate and analyze the various types of mortgages available within the UAE:
For fixed-rate mortgages, the rate of interest is fixed for a specific time period. This could range from 1 to 5 years.
One of the conventionally used and well-known mortgage types in the UAE and across the world is variable-rate mortgages. The variable rates keep changing as per the Emirates Interbank Offered Rate (EIBOR). One of the biggest benefits of this type of mortgage is that one can pay a lower amount primarily depending on the rate of EIBOR.
Discounted Rate Mortgages
It is a type of mortgage in which financial institutions or real estate developers provide a discounted rate for a specific time period. It could be highly beneficial as the EMI is significantly lower and can be afforded easily within the initial phase.
Duration of Mortgage in the UAE
The total period of loan that is allowed within the UAE is 25 years. Moreover, the overall age limit is 65 years for salaried individuals and 70 years for people that are self-employed. As a result, a long term loan results in reduced or cut down payments that you need to make on a monthly basis. However, home mortgage rates can have an influence on the total amount of interest.
The capacity for borrowing money may also increase due to the long-term period of a mortgage in the UAE. Individuals applying for loans have an option to apply for a long term loan. Individuals also have an option to repay at an extra 10% of the overall initial amount annually and they will face no potential charges.
Before you accept a type of mortgage for your home purchase, it is essential to seek out professional advice.
Rate Of Home Loans In Dubai
The rate of the loan for getting homes in Dubai primarily ranges from 3% to 5%. Usually, the rate of interest fluctuates and may decrease more in the years to come. Individuals looking to opt for a loan can go for a consistent rate. This is usually for 24 months. A revised rate is applied after that.
If you paid a small amount upfront, the revised rate could well be relatively higher. Users also have an option to obtain an offer of a fixed rate for 60 months also. However, it would generally be higher around 6%. You may also get one of the lowest home loan interest rates in the UAE as a result.
One of the most viable options available for obtaining the best home loan in Dubai is for looking at a mortgage rate that is usually variable in nature. However, it can cause uncertainty when it comes to calculating whether you would be able to afford the payments if the rate fluctuates in the future.
If you possess an improved market understanding, you may predict that the rate of interest could decrease in the near future. In this case, you will have to pay low-interest rate. However, there is a possibility that the calculations and predictions can go wrong and the rate of interest may increase. It is essential to evaluate this critical scenario when considering types of mortgage rates in the UAE.
Down Payment For Expats in UAE
Mortgage in Dubai for expats can be gotten through lenders operating in the UAE; however, they come with a few small restrictions. The UAE Mortgage Cap requires non-nationals to have a down payment of at least 20% of the property value in cash, plus any associated costs of purchase.
- If a person buys their first property which is under AED 5 million, the minimum down payment they will need to pay is 20%.
- If a non-national buys a property over AED 5 million, the minimum down payment is 30%.
- For second, third and any more properties of any price, the down payment is at least 40%.
- If the property is off-plan or under construction, the down payment will be 50% of the purchase price of the property.
If you want a zero down payment home loan in Dubai, then rent to own property may be a good fit for you.
Maximum House Loan For A UAE Mortgage?
The amount of house loan in Dubai mainly depends on how much you earn as well as your liabilities. Typically, though, for a property purchase price under AED 5 million, the maximum loan-to-value ratio for foreign nationals is 80% and for UAE nationals is 85%. For properties valued at over AED 5 million, the loan to value ratio decreases to a maximum of 70% for expats and 75% for nationals.
Documentation Required For Home Loans In UAE
For the purpose of getting loans for homes in the UAE, individuals have the option to arrange loans through different means. However, it is viable to obtain advanced approval from a financial institution to confirm the conditions in which they will provide the mortgage/loan to you.
Once you are able to find a property that you like in your budget, you have the option to finalize the mortgage in an easy and convenient manner. You may be asked to provide the following documents for obtaining a loan in UAE:
- Copy of your individual identification documents (passport)
- Proof of your individual/legal residence in Dubai as well as evidence of your individual residential address
- Documents required for proving that you have a good credit history (bank statements, proof of income, tax returns and employment letter)
- Documents required for proving mortgage affordability.
Throughout the world, affordability is pivotal as a deciding factor for loan eligibility. In several countries across the world, you are required to prove that your repayments on the total debt you hold should not be more than 35% of the total income.
For home loan Dubai, however, the law requires that debt payments should not be more than 50% of the total income. As a result, several banks have become flexible for a home mortgage.
Comparing Different Home Loans/Mortgage Rates in UAE
For individuals looking to buy a home in the UAE through mortgage or loans, there are various options for purchasing a residential property. Individuals have an option of finding different mortgage solutions that are provided by financial institutions and real estate organizations based in the UAE. You may also require a banking account to obtain a loan.
In this list, we give you comprehensive detail of current loan rates provided by various financial institutions in UAE. After evaluating them, you can decide for the best bank in Dubai for expats and national to get home loans:
- Emirates NBD: Being one of the most prominent financial institutions in UAE, Emirates NBD provides mortgage that is estimated to be nearly AED 15 million. The mortgage is provided up to 75% loan-to-value. Apart from that, there is a pre-approval facility available for individuals seeking loan.
- HSBC:Another huge financial institution that provides loans to individuals in UAE is HSBC. The bank provides mortgage options for buyers that have earnings of AED 15,000 per month. These mortgages are available for specific developments.
- Mashreq:A financial institution that provides loans and mortgages to individuals in UAE is Mashreq bank. These mortgages and loans are only provided for expatriates and UAE citizens who are either employed or self-employed and have a monthly income of at least AED 15,000. The maximum amount of loan that can be availed is AED 10 million.
ADIB And DAMAC’s Home Loan/Mortgage Offer For UAE Residents
Individuals seeking loan options in the UAE now have an excellent opportunity to get a mortgage. This is because DAMAC properties in partnership with Abu Dhabi Islamic Bank (ADIB) have brought mortgage for individuals looking to buy property in UAE.
Individuals looking to purchase a residential mortgages have an option to look out for highly attractive aspects with this option as it provides some of the best home loan rates in Dubai.
The alliance of DAMAC and ADIB provides a low rate of interest for potential property buyers. It is only 1.99% for a period of around 7 years. The service provided by DAMAC does not have any processing and evaluation fee. It also makes sure that there is a low cost for loan acquisition.
For citizens of UAE, this partnership allows them to avail financing for the property’s 85% amount. Apart from that, expats living in the UAE have a viable option to obtain loans of almost 80% of the overall price of the property within the UAE. Total tenure of the loan should be around 25 years.
By the help of these highly pivotal and productive features, obtaining a flat or villa within the UAE can become very convenient. It allows real estate owners to purchase a property that may increase in overall value without paying the full payment for rent or paying the total property payment initially.
Step by Step Process for Application of Mortgage In The UAE
Below are some of the steps expats and UAE nationals need to take to apply for mortgage in Dubai.
Finding the Right Lender
Mortgage in Dubai for residents and expats can be taken out from banks that have been registered with the Dubai Land Department. You can contact the bank directly and ask them to show you their mortgage deals. In addition, you can also hire a mortgage broker to work on your behalf.
These brokers have the industry knowledge and insight into the home loans in UAE for expats and nationals. and are better positioned to guide you. This will allow you to focus your attention on buying the right property for yourself rather than juggling paperwork and handling the mortgage process.
Selecting the Appropriate Mortgage
Dubai mortgage for expats and nationals typically fall under the fixed-rate mortgage and variable-rate mortgage. The calculation of your appropriate mortgage will depend on the following factors:
- The type of property you are buying
- Your required loan amount
- The down payment you can pay in advance
- Your lifestyle and your minimal salary for a home loan in Dubai
With the help of a mortgage calculator, you can easily find out what your monthly instalments and the interest rate will be by adding a few variables.
Getting the Pre-Approval Letter
This is the most important part of your mortgage application process. An approval letter is an official letter issues to you by the lender that qualifies you to get home financings. It details your maximum borrowing limit and gives you certainty of taking out a mortgage. If all goes well, it can take anywhere between three to five days to get the pre-approval home loan letter from your bank.
Deciding the Property
Once you have gotten the pre-approval letter and decided on how much property price you can afford, you can start looking for your real estate property. Once you know how much home loan you will be getting, you can purchase a property that stays within your budget.
Finalizing the Home Purchase
Once you have found the property of your choice, you can come to an agreement regarding Dubai mortgage for non-residents and nationals. Before that, however, the bank will evaluate the market value of the property and help you in making a good offer. Once you and the seller agree upon the price, you can pay the down payment and finalize the date of the transaction. On that date, the bank will give the agreed-upon amount to the seller and give you ownership of the property.
This process can take anywhere between 7 and 8 business days, depending upon the bank.
Mortgage Costs In The UAE
Applying for a Dubai mortgage means you need to pay certain legal and administrative fees. The exact amount of these fees will be based on your unique circumstances. Typically, though, mortgage in Dubai for expats and residents include the following:
- Bank fees including the property valuation fees, processing fees, and insurance registration fees.
- The mortgage registration fee which is 0.25% of the total value of your approved mortgage.
- Mortgage life insurance, which will have a varying costs depending on the type of property and mortgage.
Based on your unique situation, you may encounter costs for arranging the loan as well as tax-related costs. However, your biggest investment will be the deposit you give to secure the loan and the sale of the property.
Keep in mind that if you are considering an off-plan or under-construction property, this cost will be equal to 50% of your overall purchase price. In addition, if you have a bank account in a foreign land, you will need to bear the cost of an international money transfer if you want to get yourself money to pay for the associated charges and fees.
Property Insurance on Mortgage in Dubai and the UAE
Mortgage payment in UAE will also include insurance which will cover any damages to the house and the assets within it. This insurance is designed to protect the lender in case the buyer defaults on the loan. Hence, property insurance in the UAE is mandatory. Property insurance policies in the UAE can be quite affordable and provide you the flexibility of buying the coverage of the building and the content of the house, together or separately.
The property insurance will be calculated based on the value of your home and items. As a general rule, though, you will pay a yearly premium of around 0.1% of the combined value of your property and its contents.
Mortgage Repayments In Dubai and Other Cities of UAE
Mortgage repayments are the main type of home loan in Dubai for expats and nationals. These involve paying a pre-determined amount each month for the duration of the term of the mortgage. Normally, you will pay by setting a direct debit from your bank account on a fixed date each month.
Interest only mortgages are less common. They involve only paying the interest amount each month and paying the entire principal amount at the end of the term in bulk. Since these transactions are much riskier, they are often only available for a term of 5 years or less.
Mortgage Refinancing In The UAE
The mortgage market in Dubai and other UAE cities is quite competitive, which is good news for buyers since it provides them with excellent opportunities to avail discounted fixed periods on their loans. This allows homeowners to switch deals as the best offers are available for buyers who have existing mortgage.
To switch a deal, you should approach your current bank first. The best banks in Dubai for expats and nationals will want to reconstruct your loan and offer you a reduced rate for a fixed term. On the other hand, some banks may charge you extra to make a switch. However, the good news is that the rate of buy-out fees is just 1% of the balanced (up to AED 10,000).
What are the Key Places Where Expats Buy Home Property In The UAE
Expats have a lot of freedom and choices when it comes to buying property in the UAE.
In the capital city, expats are allowed to own real estate properties in nine designated areas. These include Yas Island, Al Raha Beach, Masdar City, Mariya, Saadiyat, Lulu, Sayh Al Sedairah, and Al Reef.
In Dubai, homeownership of expats is permitted in freehold areas without restriction and can have leasehold rights for up to 99 years. Some of the most sought after properties in Dubai are located at the Dubai Marina, Business Bay, Jumeirah Lake Towers, Dubailand, and many other communities. At DAMAC, you can take a look at the list of the most sought after properties here.
In Sharjah, expats and companies owned by foreign nationals do not have the right to full ownership of property in the city. However, they do have the right of usufruct for a maximum of 100 years after registering the usufruct with the Sharjah Real Estate Registration Department.
How to calculate EMI for home loan?
The Equated Monthly Installment (EMI) of the loan amount mainly comprises interest and principal portions. As a result, EMI = principal amount + interest paid for the total loan amount.
What are the criteria for home loan?
The minimum salary for a home loan in Dubai should be at least AED 15,000 monthly. The status of employment should either be self-employed or salaried. Home loans can be acquired by resident expatriates as well as UAE Nationals.
Which is the best bank for home loan?
Abu Dhabi Islamic Bank (ADIB) is the best bank for a home loans in UAE. In alliance with DAMAC properties, ADIB is providing some of the very best mortgage plans in UAE.
Which bank is offering lowest interest rate on home loan?
First Abu Dhabi Bank (FAB) provides the lowest interest rate on home loan in UAE. FAB provides a flat annual interest rate of 2.99% for individuals seeking a home loans in the UAE. The loan is applicable for under construction, completed property, or for the purpose of transferring a current loan.
Repayment options are flexible. For salaried individuals, transfer of salary is not essential. Moreover, there is free valuation and no processing fee. Apart from that, there is an option of early settlement fees on buyout loans from other banks.
What is the minimum amount of down payment for UAE residents and expats?
The bigger your down payment, the lower will be your monthly instalments. Dubai mortgage for non-residents requires a minimum of 20% down payment on purchase of property under AED 5 million and 15% down payment on the same for nationals. For properties over AED 5 million, the down payment is a minimum 30% for expats and 25% for nationals.
What are the most important elements to consider when buying a house?
When buying a house in UAE, there are several things that a buyer needs to consider. These include:
- The length of your stay in the UAE
- Your affordability. Experts recommend that your monthly housing expenses should not exceed 30% of the minimum salary for a home loan in Dubai.
- Miscellaneous upfront fees, including the Dubai Land Department Fees, property registration fees, real estate agent fees, bank mortgage arrangement fees, mortgage registration fees, and property valuation fees.
- Annual maintenance cost
- The down payment
- Projected rental income for long-term investment
- Eligibility of residency visa through homeownership
- The location
- Size of the family
- Age and condition of the property
- Market conditions
What is the length of the ideal home loan tenor?
According to UAE banks, the best home tenor is between 1 year and 25 years. The longer the loan, the higher is the eligible home loan amount.
What key terms need to be included in an MOU?
The memorandum of understanding is a document that sets out the key terms of the transaction, including the payment terms, duration of the loan, financial terms, risk allocation, governing laws etc. It may also detail certain terms that have yet to be agreed upon. Depending on the agreement between the two parties, certain terms in the MOU may be legally binding or not.
What does fair market value mean in real estate?
The fair market value is the price that the property would sell for on the open market. Fair market value includes certain conditions about the buyer and seller including:
- Being knowledgeable about the asset
- Behaving in their best interest
- Not operating under duress
- Have a reasonable time to complete the transaction
All of these conditions should determine the right fair market value.
What is the maximum home loan amount that can be borrowed by a non-UAE resident?
Home loans in Dubai for expats may be financed up to AED 10 million. Based on your unique financial circumstances, your lender or real estate developer will help determine the amount of your home loan eligibility.
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