Down Payment for Buying a Mortgage in UAE: What You Need to Know

The stable and booming economy, iconic architectural projects, and advantageous location between East and West have made the United Arab Emirates a popular destination among global real estate investors. Whether you’re looking for a mortgage loan in Dubai or other parts of the UAE, Buying a mortgage in the UAE is a financially lucrative option available for investors around the world who wish to invest in the real estate industry of this global investment hub. 

Tax advantages, 100% ownership, high rental yields, significant capital appreciation, and a steady income source are some benefits of buying real estate in the UAE. In this blog post, we’ll provide you with every detail that you need to know for buying a mortgage in the UAE. Let’s start with understanding what a property mortgage is. 

What is a property mortgage?

A property mortgage is an agreement between the loan lender (banks) and borrower to buy and maintain a property. The property is used by the borrower as security to get the mortgage. According to this agreement, the borrower has to repay the loan taken to the lender, which is usually given in regular installments, including the interest and principal. If the borrower defaults on the loan, the lender may take complete ownership of the property for which the mortgage was obtained.

What is a mortgage down payment in the UAE?

A mortgage down payment in the UAE is a non-refundable payment that a borrower has to pay before purchasing a property mortgage in the country. The investor-friendly environment of the UAE offers the benefits of taking a loan from banks to expatriates, along with the residents of the country. However, a certain eligibility criterion must be fulfilled by them to get a mortgage from a bank in the UAE. 

Most banks do not lend 100% of a property’s value to investors buying a mortgage in the UAE. For properties under the value of AED 5 million, the maximum LTV (loan-to-value) is 80% for foreign nationals and 85% for UAE nationals. The LTV is 70% and 75% for expatriates and UAE nationals for properties over AED 5 million. 

The 20 to 30% value of the property in cash is deposited by the mortgage borrowers to the bank. As a protection against future volatility, banks are legally required to request this cash deposit, known as a down payment in the UAE. 

What are the UAE mortgage requirements?

The following criteria must be fulfilled by every borrower who wants to take advantage of a home loan down payment in the UAE:

• Eligibility criteria: 

1. The eligibility criteria for buying a mortgage in the UAE is that the borrower must have a minimum age of 21 years and a maximum age of 65 years.
2. Both nationals and expatriates are eligible for buying property mortgages fulfilling the minimum salary and credit score as per the bank’s requirement in the UAE.
3. While each bank has a different minimum income requirement, it is typically AED 15,000 for salaried employees and AED 25,000 for self-employed people.
4. A stable income source is a crucial aspect of UAE mortgage requirements, as it assures the bank that you’re capable of repaying the loan you’re borrowing.

• Documents required: 

1. A copy of passport and visa, valid for a minimum of six months 
2. A copy of your Emirates ID.
3. The last six months’ bank statement is proof of financial stability. 
4. A pay certificate attesting to your employment.
5. Pay slips from the previous six months.
6. A report of credit history from your home country bank.
7. Property documents. 

What does a large down payment in the UAE do?

1. Lower loan amount: 

Your requirement for a bank loan is decreased when you make a large down payment. It also lowers the regular installments and interest costs. 

2. Lower interest rates: 

If you make a larger down payment initially for buying a mortgage in the UAE, banks offer you favorable and lower interest rates, as a large down payment reduces the risk of future fluctuations.

3. Equity building: 

A higher down payment gives you equity in the property you’re buying that you can utilize for further investments or refinancing.

4. Better loan approval odds: 

A large down payment makes your application for a home loan down payment in the UAE more appealing to the banks, as it shows that you’re financially stable and reliable. 

5. Protection of the bank: 

A large down payment protects the bank when the borrower fails to repay the borrowed loan. To compensate for the money loss due to the borrower, banks can sell the property.

6. Negotiation powers: 

A larger down payment gives you more negotiation power. 

What are the limitations of buying a mortgage in the UAE?

The following are the few limitations in buying a mortgage in the UAE, which vary depending on whether you’re an expat, UAE national, or non-resident:

• Loan term: 

25 years and 15 years are the loan terms for UAE nationals or residents and expatriates, respectively, in the UAE.

• Debt-to-income ratio: 

The total monthly debt, including mortgage, must be at most over 50% of the salary of the borrower.

Conclusion

The mortgage experts at Taskmaster Broker LLC, Dubai, UAE, provide tailored solutions in the UAE to expats, non-residents, and UAE nationals who want to buy property mortgages. They will assist you throughout the process of buying a mortgage in the UAE, simplifying this hectic process for you. 

Also read – How a Business Bank Account Shapes Company Credit Profile in Dubai