Ask The Agent - If you are planning a mortgage in Dubai

Ask the agentDhiren Gupta

I have been a businessman here for the last five years. Can I get a mortgage for multiple properties? What are the rates and procedures?

Most banks provide a mortgage for up to two properties at a time; some provide for more than two. The maximum loan-to-value and profit rates depend on which lender you choose.

As per Central Bank guidelines, if an expatriate buys his first property of less than Dh5 million, he can borrow a maximum of 75 per cent of the property value. If it is more than Dh5 million, 65 per cent of the value. For a second property and subsequent purchases, he can get 60 per cent.

Similarly, if a UAE national buys a property of less than Dh5 million, he can borrow a maximum of 80 per cent of the property value. For more than Dh5 million, the maximum is 70 per cent. For a second property or subsequent investments, he can borrow 65 per cent. Property bought off-plan requires a 50 per cent deposit from both expats and UAE nationals.

Determining the best rate requires a detailed assessment of your business and lending profile along with future plans. Lenders conduct their own due diligence by checking your past and current financial position and your business, which ascertains your future ability to pay a mortgage.

As per Central Bank regulations, the total debt burden ratio cannot exceed 50 per cent of the income.

I plan to buy an off-plan property in Dubai. Do banks offer mortgages? What are the criteria and what is the maximum loan-to-value I can get?

Banks finance off-plan projects; however, only a few offer such facility to clients. As per Central Bank rules, the maximum loan-to-value (LTV) for properties purchased off-plan is 50 per cent regardless of the purpose, value or category of the purchaser. Banks only provide mortgage support to properties listed under a master developer, with the exceptions of some projects launched by private developers. To qualify, the client needs to pay 50 per cent of the down payment towards the property; the remaining 50 per cent will be paid by the bank. When payment is done, the bank would charge interest. The developer and the client need to register the property at the Land Department which issues a pre-registration document known as Oqood, required by the bank to release the payment to the developer.

I plan to buy an office space for my business. What are the process and documents required for a mortgage? What is the average interest rate?

 Mortgage for commercial properties is limited to a few banks. The documents required and process are similar to that of a residential loan, but the bank would conduct due diligence to see if the client meets the required parameters. A commercial mortgage can be used to buy an office or retail space, even a warehouse. Most banks are comfortable with providing loans for completed projects whose title deeds are available in Dubai, also sales and purchase agreements in Abu Dhabi. Mortgage lending ratios can range between 60 and 75 per cent depending on the client’s needs and bank. Commercial rates are normally higher than residential rates, which can be from 4.49 to 8.5 per cent. The tenure can also be lower which is up to 15 years. Ideally, the client must get a pre-approval first.

I plan to get a property through mortgage. My salary is Dh23,000. How much should I keep aside as savings and to pay off my mortgage?

It is important to understand your financial safety valves and do your homework to reach your financial/lifestyle goal. Before you start shopping for a property, consult a mortgage adviser first and get a pre-approval so that you will know how much you can borrow. With this, you will know the price range of properties you should be looking at and how much you can afford to pay. However, banks only consider 50 per cent of the total earnings as a qualifying income to determine the maximum loan amount. If we talk about saving as a universal thumb rule, one should have at least four to six months worth of expenses (including EMI) in savings account or in money market instrument. It is also necessary to invest in a manner that your investment corpus fund value matches at least half of the outstanding principal so that the corpus fund can be used to redeem part of the outstanding mortgage amount.

I want to settle my current mortgage. Is it advisable to do so before its full tenure or buy it out? What are the formalities?
It seems like a smart idea to choose to pay off the loan before the end of the term if you can manage to raise some surplus funds. A few banks offer free partial settlement in a year up to a certain percentage, which can help settle your liability in a span of three to four years without paying an additional fee. However, as per the new Central Bank guidelines, the bank can charge the customer only 1 per cent of the outstanding principal balance or Dh10,000, whichever is lower, to settle the amount. If you have a plan to continue with the mortgage and need surplus funds for the existing property, approach your bank for a lower rate and get a top-up. You can also approach other lenders. Most banks offer free processing fees; a few of them cover the market evaluation fee as well. Upon a successful buyout process, the client needs to re-register the property with the Land Department.

Source: Dhiren Gupta, Special to Freehold
Managing Director, 4C Mortgage Consultancy


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