Property Purchase Process | Property Purchase Costs | Mortgage Finance

Mortgage Finance

The mortgage market for Dubai is dominated by local lenders, though UK products are starting to appear now.

Dubai lenders do not take into consideration any projected rental income from the property. The amount that can be borrowed is based on net (not gross) income. Mortgage repayments, combined with any other monthly expenses, must not exceed typically 35 per cent of net monthly income.

As you are purchasing in a foreign currency, it is advisable to obtain appropriate professional advice before deciding to take out a mortgage. It is advisable to consult a specialist foreign exchange company as they may provide a more favourable rate of exchange than the High Street banks.

Collateral

In most parts of the world, a standard mortgage will be secured against the property that it is funding. In Dubai, however, there is a concern on the part of some mortgage lenders that regional instability (a conflict or change of regime) might lead to that property not being sufficient to guarantee the loan at some point in the future. Lenders will often ask for additional collateral to be offered with which to secure the mortgage.

With this in mind, when purchasing real estate in Dubai, it is imperative that a potential purchaser makes certain that he or she has access to other property that can be used as additional collateral for the purchase or real estate in that nation.

Availability

Mortgages are now available from most banks and a number of financial institutions in the UAE. UK lenders are just starting to offer their own mortgages too.

There are two types of mortgages available in the UAE market:

Conventional mortgages – as known throughout most of the world.
Islamic mortgages – Interestingly enough, over 70% of the Islamic mortgages granted by one of the leading lenders are to non-Muslims. There are a number of reasons why Islamic finance is appealing to non-Muslims, such as the fact that there are no charges for early settlement of the loan.

UAE mortgages by non-UAE Nationals must be repaid by the age of 60 years – this means that for persons approaching 60 years, even if they can make the large repayments required in a short period of time, must be aware that for a conventional mortgage, there will no doubt be an early repayment fee.

As in any jurisdiction, a borrower should always obtain independent legal advice prior to executing any mortgage documents. Mortgage documents are inherently one-sided in favour of the bank or financial institution.

While the terms of the documents may not be able to be changed or amended, a lawyer can explain the effect of the clauses and highlight the important obligations on the borrower and identify any hidden fees or charges that are often not disclosed by the financial institution’s representative.

Entering into a mortgage is the biggest liability most people will ever assume and no one should rush or be pressured into entering into such a large commitment.

Documents needed – general

The documents you will need to submit vary from lender to lender, but as a rule, you will have to supply at least the following:

Copy of passport and proof of permanent address.
Certificate of marital status (wedding or divorce certificate) if applicable.
Bank statements from the last 6 months.
Pay slips from the last 3 months and a referral letter from your employer.
Referral letter from your bank.
Two most recent P 60 tax declarations

Self employed applicants will also be required to supply copies of their most recent tax return.
Documents will need to be legalized according to your country’s official procedure.

Documents needed - property

The property documents required (from your agents) are as follows:

Title deeds.
Preliminary contract.
Document showing the taxation value of the property.
Certificate showing the property is free of any encumbrances

Additional documents may be required, depending on which lender you choose.

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