With a large influx of expats and rising real estate demands, investors around the globe are now becoming inclined towards Dubai real estate. Construction companies are working tirelessly to meet the increasing demand while buyers’ interest in off-plan properties has increased significantly.
Whether it is for investment purposes or you plan to have an owned residence in Dubai, off-plan properties are a great choice for the following reasons.
- Best capital appreciation once the construction is completed
- Comes with lower property prices
- Flexible payment plans
What’s more, buyers can finance their off-plan purchases through bank loans. Yes, there are banks that provide a mortgage for off-plan properties in Dubai.
Here is our detailed guide that will help you understand everything you need to know about the mortgage for off-plan properties in Dubai, from financing to qualifying requirements and whatnot.
Can You Finance an Off-Plan Property in Dubai with a Mortgage?
Certainly! The majority of off-plan properties in Dubai can be purchased via mortgage. With every mortgage, there are certain qualifying requirements that must be fulfilled.
Nonetheless, these conditions are often simple and similar to those necessary for a finished property.
What Amount of Money Can You Borrow for an Off-Plan Property?
The maximum loan-to-value ratio, also referred to as ‘LVR’ for a finished property, is 80%. For example, if you are buying a property worth AED 1,000,000, the maximum amount of loan that the bank will lend is AED 800,000.
In contrast, the maximum LVR for off-plan purchases is 50%, and this ratio applies to both expats as well as UAE nationals.
For example, on an off-plan property worth AED 1,000,000, the maximum loan amount you will get is AED 500,000.
DISCLAIMER: LVR remains the same for all, whether you are purchasing an off-plan villa, townhouse, or apartment.
P.S. A BUYER CAN ONLY SECURE 50% FINANCING IF IT HAS ALREADY PAID A MINIMUM OF 50% OF THE PROPERTY’S VALUE.
How to Secure Approval for an Off-Plan Mortgage in Dubai?
Securing approval for a mortgage for off-plan properties in Dubai is similar to obtaining approval for ready properties.
The bank will employ its standard evaluation criteria to decide whether to provide the loan, assuming the developer is on the approved list.
The qualifying criteria are typical, and they may vary from bank to bank, much like with a ready property mortgage.
Hence, to secure approval, you will need:
- A photocopy of the passport
- Copies of the UAE residency documentation and current address
- Financial records, including bank statements, to ensure the borrower can afford the mortgage repayments.
Moreover, to elevate your approval chances:
- Maintain a clear record of your accounts
- Seek assistance from a mortgage broker
- Keep credit card balances low
You can also read more about a step-by-step guide on how to get a mortgage in Dubai.
Which Banks Provide Financing for Off-Plan Property Purchases?
When buying an off-plan property, the options are limited compared to buying a ready property, where buyers can essentially choose any bank for financing.
That’s because not all banks offer financing for off-plan purchases, and when they do, they are selective about the projects they fund.
Following is the list of some of the banks that offer mortgages on off-plan properties in Dubai:
P.S. Not all developers and projects meet the eligibility criteria. Moreover, every bank maintains its own list of approved developers and projects.
Is it Possible to Sell If You Have a Mortgage on an Off-Plan Property?
Reselling your off-plan property in Dubai is possible, but there’s a condition. Several developers restrict the reselling until a particular percentage of the property’s value is paid.
Also, this percentage usually ranges from 30 to 40%, but it can differ among different developers. Thus, it’s imperative to inquire about the developer’s selling regulations.
Additionally, once you fulfill the minimum payment requirement, the resale process is quite similar to selling a ready-made property.
What If You Fail to Pay Your Installments on Off-Plan Property in Dubai?
If you fail to make payments on an off-plan property, it’s critical to understand the potential consequences and the possibility of requesting a refund.
Moreover, the refund amount in such circumstances (if any) will be decided by the specific terms and conditions outlined in the Sale-Purchase Agreement.
What’s more, developers may have the authority to retain a portion of the funds already paid, including the initial deposit and any installments made, in accordance with the sales purchase agreement.
Additionally, the percentage of the refund varies based on factors such as:
- The construction stage
- Any specified penalties or deductions in the contract
PRO TIP: Reaching out to the developer for a clear understanding of the refund provisions and exploring potential alternatives is advisable.
What is the Interest Rate Payable?
The official interest rates set by the Central Bank of the UAE usually determine the payable interest rate. Also, different banks offer varying rates on specific loan types. Thus, it’s worth consulting with a professional and exploring different options to secure the best rate and deal.
Is it Possible to Still Have a Payment Plan If You Mortgage an Off-Plan Property?
No, opting for a mortgage on an off-plan property means you won’t benefit from the lucrative payment plans. It’s because you are already covering 50% of the property’s value, and the remaining amount is paid in full by the bank.
Fact: It is important to note that flexible payment plans for off-plan properties are available if you don’t use the mortgage option.
Takeaway
Purchasing an off-plan property offers favorable deals, but it’s crucial to be mindful of potential risks. If you are considering buying an off-plan property via a mortgage, conduct thorough research and consult with a mortgage lender to understand the best possible available options.
Need help with finding the latest off-plan projects in Dubai? Feel free to contact us.
