Dubai has already taken the position of an international real estate platform, where foreign investors are lured by tax-free earnings, advanced infrastructure, and a luxurious lifestyle in the city. Are you planning to invest in a holiday home, ensure a rental income, or simply move to the UAE? Then you need to know how to finance the acquisition of a property in Dubai, in particular, which procedures to follow when you are not a resident.

This ultimate guide discusses the major mortgage plans accepted in Dubai properties, the importance of banks and financial institutions, and a useful insight into real estate financing in Dubai for the foreign investor.

Are foreigners allowed to purchase property in Dubai?

Yes, foreigners can buy property within certain regions in Dubai known as freehold. These involve well-known places like:

Downtown Dubai

Dubai Marina
Palm Jumeirah
Business Bay
Jumeirah Village Circle (JVC)
Arabian Ranches

When you own property in these locations, you have all the rights of ownership, such as selling, renting or leaving the property. Yet, to fund the acquisition, one needs to understand the local mortgage ecosystem.

Types of Dubai Property Mortgage Options

The banks in the UAE offer a number of mortgage options to foreign investors. There are two common mortgages provided by most lenders:

Conventional Mortgage

It is the most widespread one, and a bank loans you a specific percentage of the value of a property, which is called the Loan-to-Value ratio (LTV). It all depends on your residency status and income profile as a foreign buyer; the standard LTV ratio is between 50% and 75%

Islamic Mortgage

Islamic mortgages are interest-free and are governed by Shariah principles. The bank instead purchases the property and rents it back to you over a certain period. This form is common with investors who like interest-free funding.

Dubai has a real estate financing that is flexible, as the loan can be repaid in a period of 5 to 25 years, and it can be fixed or variable interest. But the conditions and eligibility vary in different banks.

Foreign Buyers Eligibility Criteria

The foreign investors ought to know the simple prerequisites before applying for a mortgage:

Minimum Income: Banks have a minimum monthly income requirement (usually AED 15,000 to 25,000 for non-residents).
Age: The minimum age of the applicant is 21 years; it is preferred that the mortgage is concluded before the applicant is 65 years old (salaried) or 70 years old (self-employed).
Down Payment: A down payment of at least 50% is quite common when it comes to non-residents. This can be as low as 20 – 25% for the UAE residents.
Credit History: A local credit history is useful, but in many cases, international credit reports or bank statements will also be accepted.

The application process will need some proper documentation like passport copies, income verification, bank statements and property details.

Banking in the UAE: The Leading Financing Options

A number of local as well as international banks offer Dubai property mortgage facilities to foreigners. These are some of the most reputable banks:

Emirates NBD
Mashreq Bank
Abu Dhabi Commercial Bank (ADCB)
HSBC UAE
Standard Chartered

All these banks have specialised real estate financing packages in Dubai, both for residents and non-residents. Before you pick your lender, it is a good idea to shop around and compare interest rates, fees and terms of repayment.

Other Ways of Financing

Other than the conventional mortgages, foreigners can look at the following financing options:

Developer Financing

The post-handover payment plans are provided by many reputable developers (Emaar, Damac, Sobha, etc.). Under these plans, the buyer pays a little down payment and easy instalments over 3 to 5 years, even after possession.

Private Lending

Sometimes private property loans are provided by high-net-worth individuals or by investment firms. They may be more flexible, but are usually less regulated and charged with higher interest rates.

Off-Plan Financing

Whereas buying off-plan properties, developers normally provide instalment plans that are pegged to the progress of construction. This minimises the complete down payments or the mortgages.

Process of Obtaining a Mortgage in Dubai

To simplify the process of choosing a Dubai property mortgage, one should:

Step 1: Pre-Approval

Begin by getting a mortgage pre-approval at a bank. This will make you very clear on your budget and also make you a much serious buyer to the sellers and agents.

Step 2: Find Your Property

Identify a property in a freehold region that meets your demands- either as a residential house or an investment.

Step 3: Mortgage Application Finalisation

Provide the bank with all necessary documents, your ID, income verification and property information to get final approval on the mortgage.

Step 4: Valuation of Properties

The bank will do a valuation of the property. Their lending is normally secured on the basis of the lower of purchase price and valuation.

Step 5: Agreement Signing and Ownership Transfer

After this approval, you will sign the mortgage agreement. Once the process of payment and transfer is finalised, you will be the official owner of the property.

Expenses Incurred in Real Estate Financing in Dubai

When budgeting your investment, do not forget to include the following extra expenses:

Down Payment: Normally, 25-50% of the property cost
Bank Processing Fee: Approximately 1% of the loan amount
Valuation Fee: 2,500-3,500
Dubai Land Department (DLD) Fee: 4% of the property value
Brokerage & Legal Fees: It depends on the service providers.

These are not factored into the mortgage and are expenses that have to be presented initially.

To finance the property successfully in Dubai, the following tips are to be followed

The following are some professional hints on how to maximise real estate financing in Dubai:

Talk to a Mortgage Broker: Brokers assist in comparing the loan facilities and also simplifying the paperwork.
Get YOUR Debt-to-Income Ratio: The general preference of UAE banks is that this should be less than 50%
Know Early Settlement Fees: In case you intend to settle your mortgage before the actual time, enquire about the charges.
Consider Currency Fluctuations: This is more relevant to non-residents earning foreign currencies.

Conclusion

The property market of Dubai can be considered as one of the most liquid and investor-friendly across the globe. Foreigners can readily enter this profitable market with a variety of Dubai property mortgage schemes and liberal real estate financing in Dubai. Whether you are an expat wanting to settle or an investor wanting to have rental income, suitable financial planning is key to making a successful purchase.