How Does a Property Mortgage Work in Dubai

Introduction

A mortgage is an agreement when the bank lends money to a borrower, providing the borrower the funds to purchase a property. Rather than buying a home with cash which many home buyers cannot afford, the borrower agrees to pay part of the amount (typically 25%) and takes out a mortgage for the remaining balance. The property under mortgage is considered as security for the money being borrowed by the bank.The borrower is legally committed to pay the bank with a predetermined set of payments which are stated in the agreement contract with the bank. Property mortgage payments in Dubai's real estate market are usually made on a monthly basis. 

Fixed or Variable Interest Rate Mortgages 

Home buyers can choose between agreeing to a fixed rate or variable rate mortgage payment when buying a home in Dubai. Fixed rate mortgages have a fixed interest rate during the term of the mortgage. The fixed rate is determined prior to signing the agreement and is usually available for a one to five year payment plan. Fixed rates for the entire term of contract offers advantages to the borrower.  First, the interest rate is fixed even if mortgage rates rise during the agreement. A borrower knows the amount due each month. In contrast, variable interest rates depend on market factors and can increase or decrease at any time during the loan term.  A variable interest rate is an advantageous option if the market appears stable, resulting in potential decreasing rates. Borrowers who are financially flexible can consider agreeing to a variable interest rate mortgage.

Mortgage Rate Conditions

Mortgage rates depend on two major factors. UAE locals can receive up to 80% mortgage while expats can only reach a maximum loan value of 75%. Second, properties that are under construction and have an Aqood are only allowed a 50% mortgage. Ready properties with a Title Deed are allowed up to 75% mortgage. Loans above AED 5 million are usually capped at 65% for expats. Regardless of the Mortgage Cap, the borrower will pay the loan plus the agreed interest rate. The time period to fulfill the mortgage payment is specified in the contract. Homeowners wishing to sell their home before the completion of the mortgage contract will use the income from the property sale to pay the mortgage in a single payment. 



  •  Awad Abdelgayoum   

    (0) (0)
    Informative article.
  •  Umar Khan   

    (0) (0)
    Can you please recommend best property mortgage provider in Dubai?
  •  Selena    Replied to: Umar Khan

    (0) (0)
    Good question.
  •  Fateh   

    (0) (0)
    Mortgage rates depend on two major factors. UAE locals can receive up to 80% mortgage while expats can only reach a maximum loan value of 75%. Second, properties that are under construction and have an Aqood are only allowed a 50% mortgage. Ready properties with a Title Deed are allowed up to 75% mortgage. Loans above AED 5 million are usually capped at 65% for expats. Regardless of the Mortgage Cap, the borrower will pay the loan plus the agreed interest rate. The time period to fulfill the mortgage payment is specified in the contract. Homeowners wishing to sell their home before the completion of the mortgage contract will use the income from the property sale to pay the mortgage in a single payment.

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