Is a mortgage in Dubai possible for foreigners in 2023?

Owning your own home in Dubai is the dream of many foreigners, but the dream is very expensive. Few people are able to buy housing in the principality, paying the entire amount at once. To maintain interest in the local real estate market, the authorities and representatives of the banking sector have developed a system of measures that allow you to purchase apartments on credit. Now a mortgage in Dubai for Russians is more affordable than it may seem, and many of our compatriots are actively using this opportunity. The terms of such a loan are a little tougher, but quite acceptable.

The content of the article

• Is there a mortgage in Dubai?
• Is it worth investing in real estate?
• What documents are needed to apply for a mortgage in Dubai
• Mortgage procedure in Dubai
• Non-resident’s expenses when applying for a mortgage loan
• Requirements for the borrower under the law
• Banks’ claims
• Interest rate when buying an apartment with a mortgage in Dubai

Is there a mortgage in Dubai?

Yes, there is a mortgage lending system in the emirate, but those who would like to use it should consider several points. If the client is a resident, then he will be provided with a lot of options from which he can choose the best one.

However, foreigners are subject to more conditions. As a down payment, they will have to pay at least half of the cost, it is possible to choose options only in the “Freehold” zones – areas intended for foreigners, where they have the right to buy objects in full ownership. At the time of paperwork, the building must either be put into operation, or there must be less than two years left before the commissioning. Foreigners have the right to count on a mortgage loan in the amount of up to 75% of the cost of apartments, but it should also be borne in mind that non-resident clients are more often refused. A loan can be taken for a period of 1 to 25 years: it all depends on a set of conditions, including credit history, the selected area.

Is it worth investing in real estate?

Investing in real estate in Dubai is definitely worth it. The city offers a luxurious lifestyle of leisure and life, an attractive business environment, and a loyal tax system. The market is constantly expanding, and the value of objects is steadily growing. To date, it is characterized as the most stable and attractive. At the same time, the government of the Principality is constantly introducing new, simpler and more convenient conditions for investors.

Investing in this sector is an excellent opportunity to preserve and move capital. It is no secret that over the past year, the economic situation in Russia and the EU countries has become more complicated. Many entrepreneurs are under the threat of sanctions restrictions, the risk of financial losses has increased due to the blocking of bank accounts and seizures of property. Therefore, a mortgage in Dubai for Russians in 2023 is another way to save money. You can’t take a few hundred thousand dollars abroad just like that, but buying a home is a suitable option. You have to pay for storing currency in Russian banks, and it is now almost impossible to withdraw it to other countries.

Real estate in Dubai is an object that can be used for housing, for renting, making a profit of up to 7% per annum, as well as for generating profit in another way, reselling it after a while at a higher price.

Now a favorable exchange rate has been established in the Russian Federation, at which it is profitable to sell property and purchase it with the proceeds in countries with a loyal attitude. At the same time, market volatility is so high that it is not clear what will happen to the dollar in the near future. And the best way to secure the accumulated funds is to invest them in housing under construction in the UAE.

It is important that when buying residential property worth 2 million dirhams or more, the buyer receives a ten-year “golden” resident visa for 10 years with the right to sponsor his family and other household members (servants, cooks, governesses), as well as the ability to conduct many types of commercial activities

What documents are needed to apply for a mortgage in Dubai

All financial issues in the UAE are handled with the utmost care. Bank employees conduct a deep check of a potential client. To do this, you will need to provide a number of documents. It is noteworthy that for each bank, and the applicant as a whole, the list of securities may be different. In any case, it is better to immediately prepare:

• mortgage application;
• a copy of your passport, resident visa;
• papers confirming the availability of housing;
• bank statement on its current status and cash flow for the last six months;
• tax returns;
• salary certificate, reference from the employer.

Business owners will need to confirm the fact of registration of the company, provide for consideration the charter and the opinion on the financial condition of the company from licensed local auditors.

Do not forget that all papers must be submitted for consideration in English or Arabic. Verification takes an average of 4 days. In addition, employees can request additional papers.

Mortgage procedure in Dubai

Before getting a mortgage in Dubai, you will need to go through several stages. Since the Emirates is a progressive country, actively working to simplify many procedures, the process should not take too long. Proceed as follows:

1. Decide on the bank. Choose carefully, sparing no time. Carefully study all the offers and pitfalls. Look for Russian-language reviews about a financial institution, because not all of them willingly approve loans to Russians.
2. Fill out the application form of the bank and send it for preliminary consideration.
3. In case of a positive decision, the borrower must decide on the object for purchase within the established period (about 2 months, as a rule).
4. Closing the deal, signing the purchase agreement, registering the transaction and obtaining a certificate of ownership is the next step.
5. Now provide the received certificate of ownership to your financial institution to sign an agreement with it.
6. Pay the down payment.
7. Take out real estate insurance and strictly follow the payment schedule.

We strongly recommend that you do not have delays in payments. In the future, this can hit your credit history hard and it will be very difficult to get a second loan.

Non-resident’s expenses when applying for a mortgage loan

1. Down payment, which can reach up to 50% of the total amount.
2. The tax to the Land Board is 4% of the price of the property.
3. Administrative fee – 4500 dirhams + 5% VAT.
4. Title insurance fee is AED 550.
5. Life insurance – 0.5-1% of the total loan amount (this is a mandatory requirement for granting a loan throughout the country).
6. The certificate of ownership is issued in court. It costs AED 280.
7. 2% of the purchase price + 5% VAT to pay for the services of an intermediary, if one was involved.

Requirements for the borrower under the law

1. Age limit. A borrower can be a person between the ages of 21 and 65, i.e. from the moment of reaching the age of majority to retirement age. But there are several nuances here. If the applicant does not have residency, then the minimum age is raised to 25 years. At the same time, the bank can set an older age, since it must be sure of the absolute solvency of the potential client. Also, money will not be given to pensioners, with the exception of those who have their own business. For such applicants, the age limit has been increased to 70 years, but the period for which funds will be provided will be minimal.
2. Availability of sufficient income. This can be a salary or income from a business.
3. Availability of a resident visa.
4. The ability to make the first deposit in the amount of at least 25% of the total cost of the property, as well as pay additional costs that will add another 5-7%.
5. It is desirable (but not necessary) that the applicant is already the owner of real estate in the UAE. This circumstance will significantly increase his solvent status.

This is a list of general requirements enshrined in the law, but banks have the right to put forward other requirements. For example, they are more likely to approve an application from a married couple, a joint appeal from brothers and sisters, business partners.

Where a non-resident is allowed to buy real estate

Despite the fact that you can buy housing in the country freely, foreigners have the right to choose options only in specially designated areas:

• Leasehold, where you cannot purchase full ownership, but you can lease properties for a period of 99 years and then renew it;
• Freehold, where even non-residents are allowed to buy premises with freehold ownership. This means that it is allowed to be used for living, for renting, as well as to sell, donate, and inherit.

In these areas, you can buy property that has already been completed or will be completed in the next 2 years.

Banks’ claims

A credit institution wants to be sure that it will not incur losses from the concluded transaction, so it tries to minimize the risks of non-payment.

By age

The main requirement is that the person must be of working age, i.e. from 21 to 65 years old. The younger the applicant, the longer the loan can be obtained (up to 25 years), which means that monthly payments will be minimal. 40 years is the age limit when you can apply for a loan for 25 years. The old age of the client is an additional risk for bankers. For them, the loan repayment period is reduced to 10-15 years.

To the level of wages

For each object, the requirements will be different. The more modest the dwelling, the lower the minimum wage requirements will be. The area is also important: in prestigious locations, prices are higher.

If a customer decides to make a purchase in low-cost areas, such as Motor City, Discovery Gardens, or Silicon Oasis, then he should earn at least $3000 per month. To purchase apartments in more prestigious locations (Downtown, Business Bay), the salary level must be at least 4500-5000 dollars. Villas in JVC, Dubailand are available to those who earn more than $5000 per month, and luxury villas start at $14,000.

If there are other loan obligations, how will they affect the approval

Having a good credit history is a great advantage for the applicant. It is reflected in the Al Etihad Credit Bureau. A person can have several loan obligations at the same time. This is permissible for granting another loan, but provided that:

• payments on all obligations are less than 50% of monthly earnings;
• Each family member has a minimum of AED 3500.

What is the responsibility for late payment?

The UAE government has a tough but fair policy towards expats who want to buy a villa or apartment, especially when it comes to buying on credit. There are many valid reasons why a person could not make the next part of the payment on time. The financial and government authorities are well aware of this. Therefore, a clause was introduced into the legislation that no punishment will follow for a delay of 30 days. The debtor will be called by bank employees, reminded of the terms and asked about the reason for the delay.

If the delay exceeds the permissible 30 days, information about this will be entered into the Al Etihad register of “negative reviews” and the next time the person will not receive a loan.

But this is not the worst punishment. If the time for payments is greatly exceeded or the situation has repeated several times, the bank has the right to go to court and initiate proceedings, which will drag on for a long time and will cost the defendant dearly. Moreover, according to the law, an expat will be deported for such violations, but first he will be obliged to pay off his debt obligations in a short time.

Interest rate when buying an apartment with a mortgage in Dubai

It can be of several types:

• fixed, i.e. does not change throughout the entire payment period;
• floating from 2.5%, changing every month depending on the rate of the Central Bank, without an upper limit;
• floating with an upper limit;
• discounted – a type of floating, for which a discount is set in the first few years;
• refinancing secured by an existing mortgage.

The latter option becomes profitable if the borrower manages to apply for a loan at a lower interest rate.

What does the interest rate depend on?

The floating rate depends on:

• market demand;
• Inflation;
• the pace of economic development;
• Eibor rates.

The fixed rate is always higher than the one set by the Central Bank.

Early repayment of the loan is subject to a penalty of up to 1% of the loan amount.

Which banks are profitable to take a loan from?

Few banks agree to lend funds to foreigners and non-residents, wishing to avoid unnecessary risks. The most favorable conditions for this category of clients are offered:

1. Emirates NBD is the second largest in the UAE. It provides mortgage loans for expats at 2.49% per annum.
2. HSBC lends to expats at 2.39% per annum, but on the condition that the borrower earns more than AED 15,000 per month.
3. Mashreq is the oldest financial and credit institution in the country. It has a network of branches in the Middle East and North Africa. Mortgage loans of up to AED 10 million are issued here for 25 years, but the down payment is 50% of the value of the premises. The rate is 2.49%, the minimum wage is AED 15,000.

Legal subtleties for spouses

According to UAE law, the owner of the property is the one whose name is recorded in the mortgage agreement and the certificate of ownership. If all documents are issued in the name of one of the spouses, then the second spouse does not have any rights to this property (the court will consider that the second spouse voluntarily renounced in favor of the first). In case of divorce, the housing purchased in this way will not be considered jointly acquired and will be completely transferred to the one who took and repaid the loan.

In order for the second spouse to have the right to housing, when purchasing it, it is necessary to immediately register the property as a joint property.

How to get a resident visa after buying a property

If the buyer makes a down payment of 1 million dirhams or more, this immediately gives the right to apply for residency. The main document is a certificate from the bank about the amount deposited. In addition to it, you will need:

• the deed of sale signed by the seller;
• certificate of ownership;
• certificate of medical examination and the absence of diseases such as AIDS, HIV, syphilis, tuberculosis, some others;
• visa application;
• a valid passport;
• certificates of no criminal record in the homeland and in the Emirates;
• photo 3 X 4 on a white background without a headdress.

Also, the applicant must submit their biometric data at an accredited center.

Installments from developers

This is a profitable alternative to a mortgage in Dubai for foreigners. Premises in buildings under construction are much cheaper than in finished ones. At the same time, the developer offers flexible payment terms. The down payment most often does not exceed 10-20%. It will be the lowest if the construction is at the design stage. The closer the construction is to completion, the larger the down payment, but it will still be much lower than you will have to pay for obligations to the bank. In addition, the cost of the housing itself in an unfinished building will be lower. The terms of payments are flexible: they are prescribed in the contract.