Your Guide For The Best Home Loan Interest Rates in Dubai UAE

Thu, 2021-01-14 10:06

It is a fact that getting loans for homes in Dubai is an essential aspect for homeowners as they do search a home for the purpose of purchasing villas or apartments in Dubai. In a similar context, a search term that is often used as home loan for expatriates in Dubai. If you consider the significantly significant number of expatriates living in UAE, it is certainly not surprising.  If the expatriates living in Dubai do make the city their personal space for living, they require purchasing 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 one requires before they focus on making an application for the purpose of getting loans for purchasing 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. Usually, financial institutions in Dubai have to adhere to the following criterion for eligibility. They are:

  • 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, loans for homes 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 upfront payment. Apart from that, you are required to have an idea of the duration of mortgage. As a result, you should decide if you do require a fixed or variable interest. These essential considerations are needed for any expat that looks to find mortgages in Dubai.  

Initial payment required

From a financial perspective, there are few payments that are required by expats to be paid for obtaining loan for residential purpose in UAE. The central bank of UAE has placed these important rules. 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) and 2% commission for real estate. There are several Dubai based banks that do allow takers of mortgage for adding nearly 75% of overall purchase fee for obtaining loan.

Prior approval for mortgage 

For individuals that are looking to purchase a home within the UAE, it is essential to get a prior mortgage approval. This will help to provide you a vivid confirmation regarding their total budget. It is pivotal because you would be able to close down your search within your total budget. Apart from that, whenever you have to sign an agreement for sale of 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. 

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. Within that context, the valuation illustrates that your property may well be overpriced. However, your financial institution has refused to provide you any payment. As a result, the clause for valuation may well protect the deposit provided by the buyer. Moreover, the financial valuation may well be performed in the application form before the sales agreement is signed.

The plan for loan or mortgage repayment from a financial institution is mainly based on an individual’s monthly income. There are various cases where value of the repayment amount is only 20% of the total monthly income you earn. However, if you do have any other loans than the amount will be deducted for your calculation. Financial institutions make a calculation based on their individual borrowing capacity based on their formulas.

Using home mortgage loan in UAE 

Within the 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 for purchasing a property and make a payment through a convenient schedule of payment. A processing fee may also be required to pay. 

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 that a very minor percentage of the amount of property is required for payment as down payment should be paid by the means of easy monthly installments (EMI). We will now evaluate and analyze the various types of mortgages available within the UAE:

Fixed rate mortgages: 

For the fixed rate mortgages, the rate of interest is fixed for a specific time period. This could range from 1-5 years. After completion of this period, the particular product will have fixed rates that are set aside by the financial institution providing the loan. 

Variable rate mortgages: 

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 mortgage in which financial institutions or real estate developers provide a constant rate for specific time period. It could be highly beneficial as the EMI is significantly lower and can be afforded easily within the initial phase. 

Mortgage duration

The total period of loan that is allowed within the UAE is 25 years. Moreover, the overall age limit is sixty five years for salaried individuals and seventy years for people that are self-employed. As a result, a loan in the long term does reduce or cut down your payment 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 long-term period of mortgage in UAE. Individuals applying for loan have an option to apply for a long term loan. Individuals also have an option to repay at an extra 10% of overall initial amount annually and they will face no potential charges. Before you make a decision that could well be based on your Dubai searches for home loan, it is essential to seek out a professional advice.

Rate of home loans in Dubai 

The rate of 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 did pay a small amount upfront, the revised rate could well be relatively higher. Users also have an option to obtain an offer of 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 rate in UAE as a result. 

One of the most viable options available for obtaining best home loan in Dubai is for looking at a mortgage rate that is usually variable in nature. However, it is essential for predicting the overall payment you may be required for payment in the future. Having an accurate budgeting would be nearly impossible. But, if you do possess an improved market understanding may well feel that the rate of interest could well decrease in the near future. Variable or fluctuating rate of interest does mean that an individual has to pay low interest rate. But one must focus on the things that could well go bad in the future. There is a possibility that the calculations and predictions well go wrong and the rate of interest may increase. It is essential to evaluate this critical scenario. 

Documentation required for home loans in UAE

For the purpose of getting loans for homes in UAE, individuals have the option to arrange loans with different options available at their disposal. However, it is viable to obtain an 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 may 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 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 for deciding factor if you can be provided a loan. 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 home mortgage.

Comparing Different Home Loans/Mortgage Rates in UAE

For individuals looking to buy a home in 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. Prospective buyers do have an option for checking out different aspects of the interest rate for loan options throughout the country. 

It is pivotal to find the residential mortgage that can is individually beneficial for you. You may also require a banking account to obtain loan. In this list, we would provide you a comprehensive detail of current loan rates provided by various financial institutions in UAE. After evaluating them, you can decide for the best bank for home loan in UAE:

  • 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 mortgage to individuals in UAE is Mashreq bank. It provides loans to UAE residents as well as expatriates. These mortgages and loans are only provided for expatriates and UAE citizens that 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 and mortgage options in UAE now have a good opportunity. 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 for purchasing residential mortgage have an option to look out for highly attractive aspects with the offer that is provided by DAMAC and ADIB. They provide some of the best home loan rates in Dubai. 

The alliance of DAMAC and ADIB does provide low rate of interest for potential property buyers. It is only 1.99% for a period of around 7 years. It is certainly applicable to all properties brought by various users through DAMAC. The service provided by DAMAC does not have any processing and evaluation fee. It also makes sure that there is low cost for loan acquisition. 

Citizens of UAE do have an option to get a mortgage payment. This can allow them to avail financing for the property’s 85% amount. Apart from that, expats living in the UAE do 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 gaining full payment for rent or to pay the total property payment initially.

FAQ’s

How to calculate EMI for home loan?

The Equated Monthly Installment (EMI) of the loan amount mainly comprises of interest and principal portion. As a result, EMI = principal amount + interest paid for the total loan amount.

What are the criteria for home loan?

For obtaining home loan in UAE, minimum monthly salary is required to be AED 15,000. 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 home loan 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 home loan in 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.

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