Home loans in Dubai are one of the most common financing options for buying residential real estate. It gives you the convenience of buying a property while you can pay installments at comparatively easier intervals. However, it is important to be aware of the type of home loans in Dubai, their markup rates, and how you can get a home loan. We have prepared a detailed guide on home loans in Dubai; let’s get started.
Home Loans in Dubai—Overview
Choosing the right home loan in Dubai is largely influenced by individual preferences and the borrower’s eligibility. Before exploring the various options available, it is important to understand what is a home loan.
Essentially, home loans in Dubai are financial products offered by banks, mortgage companies, or other institutions to help individuals purchase a home. The lending institution has the right to retain the title to the property until the borrower fully repays the mortgage, at which point ownership is transferred to them.
Who Can Get a Home Loan in Dubai?
Before applying for a mortgage/home loan in Dubai, it is important to check if you meet the necessary criteria. Here’s what you need to qualify:
- Residency: You must be a UAE resident or a national.
- Age: The age of the applicants should be between 21 and 65 years.
- Income Requirements: If you are salaried, your monthly income should be at least AED 15,000. For self-employed individuals, the requirement is AED 25,000 per month.
Ensure that you fit these criteria before moving forward with your mortgage application.
Different Types of Home Loans in Dubai
Right, let’s talk about the different types of home loans available in Dubai. Choosing the right mortgage can lead to lower costs and reduced risks for borrowers.
1. Fixed-Rate Mortgage Loan
A fixed-rate mortgage offers stability, as the interest rate remains unchanged throughout the loan term. This rate is set before you finalize your agreement and will stay consistent for one, two, three, or five years, depending on your lender.
The predictability of fixed-rate loans allows borrowers to set their budgets effectively and protects them from fluctuations in interest rates. However, once the fixed-rate period concludes, the loan will switch to a variable interest rate based on the Emirates Interbank Offered Rate (Eibor).
2. Variable-Rate Mortgage Loan
As the name suggests, a variable-rate mortgage features interest rates that can change over time. These rates are generally lower than fixed rates, but their unpredictability can make budgeting a challenge. Monthly payments may vary depending on fluctuations linked to Eibor. If you think that interest rates will decrease in the future, opting for a variable-rate mortgage might be advantageous.
3. Capped Rate Mortgage
A capped rate mortgage works similarly to a variable-rate mortgage but comes with a safety net. While the interest rate is not fixed, there is a maximum limit set beforehand. This provides a balance of flexibility and security and ensures that your payments won’t exceed a certain threshold.
4. Discounted Rate Mortgage
This type of mortgage offers an initial discount on the interest rate during the first few months. However, it is crucial to assess the terms that follow the discount period to avoid unexpected costs down the line.
5. Offset Mortgage
A more contemporary option, the offset mortgage links your mortgage to your savings and credit accounts. Any extra funds in these accounts can reduce the overall interest on your mortgage. It helps you manage your finances in a better way.
6. Remortgage
If you are looking for additional funds while still paying off an existing loan, remortgage can be an effective solution. It allows you to secure extra financing without starting a completely new loan process.
Each type of home loan has its own set of benefits and considerations, so it is essential to choose one that aligns with your financial situation and goals.
Popular Banks That Offer Dubai Home Loans
There are various banks offering home loans in Dubai; some of the famous ones include:
- NBD Bank
- HSBC Bank
- Dubai Islamic Bank
- ANZ Bank
- Commercial Bank of Dubai
- Bank of Baroda Dubai
Documents Required for Home Loans in Dubai
If you are looking to secure a home loan or mortgage in Dubai, you will need the following documents.
Proving Your Identity
First and foremost, you have to verify your identity. Make sure to bring:
- Your original Emirates ID and a copy
- A valid passport along with a copy of your resident visa (if your visa is in an old passport, include that as well)
For Self-Employed Individuals
If you are self-employed, you need to submit the following documents:
- A copy of your valid trade license
- The Memorandum of Association (MOA) with any amendments
- The last two years audited financial statements
- Bank statements for the past six months
For Salaried Individuals
If you are employed, here is what you will need to provide:
- A recent salary certificate addressed to the bank
- Bank statements for the past six months
- The latest payslips
- Proof of previous employment if you’ve been in your current job for less than three years
For Co-Borrowers
If you have a co-borrower, they will also need to provide:
- Their valid passport and visa page
- Any income documents, if applicable
If your co-borrower is a company, you will need to include the Memorandum of Association, trade license, and copies of the partners’ passports. Keep in mind that the bank may request additional documents at their discretion.
Preparing for Your Application
Having these documents ready before you visit the bank will help streamline the process and make it more efficient.
Most banks in Dubai offer home loans covering 75% to 80% of the property’s value, so you have to be prepared to pay the remainder as a down payment.
Process of Getting Home Loans/Mortgage in Dubai
Here are the steps to follow to get a home loan in Dubai.
- Choose Your Approach: Decide whether you want to work with a mortgage broker who can assist you or go directly to a bank to explore available options.
- Select Your Mortgage: Assess your needs and choose a mortgage type that fits your situation. It is also wise to find a lawyer who can ensure a smooth and secure transaction.
- Gather Documents for Pre-Approval: Prepare and submit the required documents to the bank to obtain a mortgage pre-approval. Once this is done, you will receive a confirmation letter outlining the amount the bank is willing to lend you.
- Find Your Property: Look for a property you would like to buy within 60 to 90 days.
- Finalize the Purchase: Once you have found your desired property, finalize the deal by paying a deposit to secure the purchase. You will also need to agree on a completion date for the transaction.
- Provide Additional Documents: If the bank requests further documentation, be ready to supply it to complete your mortgage application.
Interest Rates for Home Loans in Dubai
In Dubai, home loan interest rates typically range from 2.99% to 5%. If you choose a fixed-rate mortgage, your interest rate will usually remain the same for two years. After that period, it will switch to a variable rate. Generally, the lower the upfront payment from the lender, the higher your overall costs may be. There are also fixed-rate options available for five years, but these rates tend to be closer to 5%.
You can also opt for a variable-rate mortgage, where the interest rate changes daily based on the Emirates Interbank Offered Rate (Eibor). This option can be beneficial if you expect interest rates to drop. However, budgeting can be tricky with variable rates because they can rise unexpectedly, which means you might end up paying more than you planned.
How to Find Home Loan Interest Rates in Dubai?
To check current home loan interest rates in Dubai and calculate your potential monthly payments, you can use search terms like “Home Loan Calculator Dubai” or “Calculate home loans in Dubai.”
You will find many online mortgage calculators that can help. Banks that offer home loans also have these calculators on their websites. Simply input details like the home price, interest rate, down payment, and loan duration, and you will get an estimate of your monthly payments.
Using these calculators before applying for a loan is a smart move. They help you understand how much you can borrow and what your monthly repayments will look like.
Things You Should Know About the Home Loan Repayment
Here are some important points to keep in mind regarding home loan repayment in Dubai.
1. Repayment Amount
The amount you will need to repay each month generally depends on your monthly income. Typically, lenders prefer that your mortgage payment does not exceed 25% of your monthly salary.
If you have other loans, like a car loan, that amount will also be considered when calculating how much you can borrow. Each bank has its own methods for determining borrowing capacity.
2. Security Check
All banks in the UAE require a security check when you take out a mortgage. This check serves as a form of security for the bank in case you are unable to repay the loan.
If you default on your mortgage, the bank can present the check. If it bounces, the bank has the right to initiate legal proceedings and take possession of the property until the outstanding debt is settled.
3. Mortgage Duration
In Dubai, the maximum loan term for a mortgage is 25 years. Longer loan terms can lower your monthly payments, but they also increase the total amount of interest you will pay over time. Additionally, with longer terms, you may be able to borrow more.
Frequently Asked Questions
What is the down payment for Dubai home loans?
When applying for home loans in Dubai, you usually need to make a down payment of at least 15% to obtain financing from banks and financial institutions. This upfront payment shows your financial ability to handle future expenses.
Can expats get a mortgage in Dubai?
Expats and non-resident foreign investors can also access mortgage options for expats and foreigners in the UAE, including Dubai. Local banks and financial institutions offer a variety of home loan solutions according to the unique requirements of expatriate buyers.
Summing it up
So, this was all about home loans in Dubai. there are different types of mortgages and each one of them has its own perks and drawbacks. It is upon you assess which one suits your needs.