Top 5 Things you Should Know about Mortgages in Dubai

Dubai with its tall skylines and affluent lifestyle has turned into a hotspot for property purchasing. However, if you are not one of those lucky individuals with plenty of cash lying around, you will require a mortgage to buy your desired property in Dubai. Fear not, we are here to help you navigate the complex world of options for Mortgage in Dubai. Now, let’s take a closer look at the five best things that must be learned before you finally put your signature on the contract.

1. Mortgage in Dubai: The Basics of Down Payments

Starting with the basics, the topic of down payments. In Dubai, you cannot just walk into a property with your pockets empty. The UAE Central Bank has set some ground rules to ensure that things do not go out of hand. If you are a first-time buyer and the value of the property does not exceed 5 million AED, a down payment of at least 20% of the property price is required. For properties over 5 million AED, that increases to 25%. If it is your second time around (or the second property), expect to pay 30-35% for the down payment.

Now, this might sound like a lot, especially if you are a first-time buyer and are used to having lower down payments in other countries. But there is the positive side, such regulations prevent the market from overheating and the formation of the property bubble. Also, a larger down payment results in lower monthly payments, and this can help when it comes to your monthly cash outlay.

2. Interest Rates: Which is better, Fixed or Floating?

When it comes to interest rates in Dubai, you have the choices. There is a fixed interest rate whereby the interest that is charged remains constant for some period usually ranging from one to five years while there is a floating interest rate whereby the interest rate can vary depending on market conditions.

With fixed rates, you have the benefit of at least understanding the amount you are going to spend each month. It’s like having a daily predictable menu. Hence, floating rates present some volatility issues, sometimes volatile to the extreme. Fixed rates are always higher than when they begin with fluctuating rates but could increase (or decrease) in the future. It is somewhat risky and could easily turn out to be a risky investment in the future, especially if interest rates keep being low.

The fixed rates are preferable when choosing the type of rate, if you do not want to take many risks or if you are in a financially vulnerable position. This plan can be suitable for you in case you just love certainty and can add several extra dollars on the first payments. Having a floating interest rate means a certain degree of instability in the payment that you have to make and, if you don’t mind starting small and you’re willing to take the risk of possibly paying higher amounts than agreed in the future, then you’ll find floating interest rate ideal.

3. The Mortgage Cap: Learn to Understand Your Limits

In Dubai, unlike many developed countries the amount which you can borrow for a mortgage is regulated. This is not the bank trying to save its pocket – it is a rule given by the UAE Central Bank for the ends of both the borrower and the lender.

On the same note, the mortgage amount granted to expatriates depends on the property value with a limit of 75/165 for property value of not more than 5 million AED while properties costing over 5 million AED attract a ceiling of 65/165. UAE Nationals can borrow a little more, to the extent of 80/ % for property prices of less than 5 million AED.

Such a Mortgage in Dubai ceiling implies that you and the intended property will have to save a little money for the down payment. But on the bright side, this is probably because you are not stretching yourself financially in any futile endeavor. Sometimes, people do need to take a mortgage loan and that’s surely not a bad thing. But you should be thoroughly known of the process of applying for a mortgage loan.

4. The Age Factor

According to its report, the presence of mortgages and retirement made the United States more attractive to investors compared to Europe while, at the same time, the housing bubble weakened the economy through the deterioration of household credit quality.

In Dubai, your age is going to sharply influence your mortgage even in that particular country. It’s further common to find that most banks specify some ripening age, by which all the mortgage, needs to be paid, such as 65 or 70 years old. This means if you are already 50 or 60 years old, then it would be hard for you to secure a long-term mortgage.

But this should not discourage you if you are not spring chicken. Some of the banks have special mortgage products that can be accessed by elderly individuals. If you are younger, then this is quite a useful indication to start thinking about long-term strategies. A 25-year mortgage might be uncomfortable when you are 30 years old but by the time you pay off that mortgage, you are almost ready for your rocking chair.

5. The Use of Credit Reports

Finally, let’s discuss credit checks. Your credit history in Dubai is as important as your report card is to you in school. Before approving your Mortgage in Dubai, banks will assess your credit score with the Al Etihad Credit Bureau.

This credit check considers your track record on payments, your current balance, and your behavior as a borrower. This means if you have shown discipline in paying your bills on time and handling your debts properly, then you will be okay with the banks. However, if you have defaulted before or had instances where you nearly reached the limit of your credit cards, your interest rates may be high or you may not qualify for a mortgage at all.

Fortunately, you are allowed to review your credit report before applying for a mortgage. This allows you to identify any mistakes made or areas that need to be worked on further. It is much like having a checkup for your car, it may not be a very interesting thing to do but then it saves you a lot of trouble later on.

Ending Your Mortgage Experience in Dubai

And that concludes our list of five things you ought to know about mortgages in Dubai. Down payments of tens of thousands of dirhams to age restrictions, credit checks, and multiple interest rate choices – the Dubai mortgage scenario can seem overwhelming at the onset. But with this knowledge, you stand well-prepared to make the right decisions as far as your property purchase is concerned. Before diving into mortgage details, explore your dream home options with 11Prop Realty.

Keep in mind that having a mortgage in Dubai doesn’t mean checking the boxes, it is about having a financial product that meets one’s needs and expectations. Don’t rush into making your decision; do some research beforehand and do not hesitate to ask questions. Your dream house is waiting for you in Dubai and with a proper mortgage, you might own the house before you know it. So, let’s just get ready and start hunting for your dream home!