Purchasing a property with a mortgage in Dubai’s secondary market can be a complex and time-sensitive process. Both buyers and agents need to understand critical steps and requirements to avoid costly delays. This guide outlines the most important considerations, emphasizing the need for pre-approval before signing any sales agreements and navigating essential fees, timelines, and bank requirements.
1. Pre-Approval is Crucial
Before entering into any contract of sale (Unified Contract F) with a seller, buyers must secure mortgage pre-approval from their bank. Pre-approval ensures that buyers are eligible for financing and understand their borrowing capacity. Without this step, buyers risk legal and financial complications if they cannot secure funding after signing the contract.
2. Understand the Process and Timelines
The typical timeline for a mortgage transaction involves several stages:
- Valuation Process: After signing the Contract (Unified Contract F), buyers must initiate the property valuation through their bank within at least seven days. This valuation determines the loan-to-value ratio and the property's eligibility for financing.
- Final Offer Letter (FOL): Once the valuation report is complete, the bank usually takes 10 to 20 days to issue the FOL, confirming the approved loan amount and specifying fees, including:
- Bank’s contribution toward the sale price
- Agency fees
- Dubai Land Department (DLD) fees
- Developer (if applicable).
3. Fees Involved
Buyers need to budget for the following standard fees of Dubai Land Department:
- Dubai Land Department (DLD) Transfer Fee: 4% of the selling price.
- Knowledge and Innovation Fee: AED 580.
- Trustee Fee: AED 4,200.
- Mortgage Registration Fee: 0.25% of the loan amount.
In addition to the selling price paid to the seller, buyers should also consider the following expenses:
- Brokerage fees to the real estate broker.
- Administrative and professional fees to the mortgage advisor for loan processing.
- Conveyancing fee to the conveyancing officer.
It is essential to have these funds ready to ensure a smooth transfer process.
4. Key Considerations for Form F
Buyers and their mortgage advisors should identify any special conditions that need to be included in Form F. For instance:
- If the valuation report estimates a value lower than the selling price, buyers may need an option to cancel the contract without penalties. This clause should be explicitly stated and explained to the Seller as the Buyer’s condition.
- In cases where buyers fail to obtain the final offer letter despite best efforts, proof of communication from the bank is necessary to invoke any exit clauses.
5. Adding Multiple Buyers to the Title Deed
When purchasing as a family or group, buyers should consult their bank about including multiple names on the MOU and title deed. Banks often have restrictions, allowing only the primary mortgage applicant’s name or requiring specific ownership percentages.
Action Steps to Avoid Issues:
- Confirm Bank Policies: Ask your mortgage advisor whether your bank permits multiple names on the title deed.
- Secure Written Confirmation: Obtain a written statement from the bank regarding their policies.
- Gifting Option: If the bank does not allow multiple names, consider adding family members after the transfer through a gifting process. The DLD charges only 0.125% of the property value for gifting to first-degree relatives.
6. Power of Attorney (POA) and Third-Party Payments
If either party uses a POA in the transaction, ensure the bank’s compliance department approves it in advance. Banks may reject payments to third-party accounts or POA holders if their policies are not followed.
A proactive approach and clear understanding of bank requirements, timelines, and fees are essential for a seamless mortgage purchase. Pre-approval is the foundation for success, and careful planning prevents delays and unexpected obstacles.
For expert guidance and personalized assistance, contact Fam Conveyancing:
Our team prioritizes your legal awareness and compliance for a smooth, successful property transaction.