Homeownership is one of the most essential, yet also one of the most difficult prospects to achieve in life. Thankfully, home loan in Dubai is a straightforward process, and you don’t have to jump through hoops should you wish to apply for one.
If you’re looking to get a home loan in Dubai, this guide will provide you with essential information such as the types of loans available, the application process, eligibility requirements, as well as tips to help you get the right home loan.
Why get a home loan in Dubai
Dubai is one of the most beautiful cities in the world. With mesmerizing views, exhilarating places to visit and a myriad of opportunities, the city captures the essence of luxury and innovation. With that said, Dubai’s attractive property prices, low interest rates and various mortgage options will make owning your dream home in Dubai more attainable than ever.
Types of home loans in Dubai
Fixed-rate mortgage
A fixed-rate mortgage provides stability with a pre-set interest rate that remains constant for a specific repayment period, usually less than 5 years. While this offers protection from rising interest rates and makes budgeting easier, be prepared for a higher reversion rate once the fixed period concludes. This type suits those seeking shorter repayment terms. It has protection from interest rate increases, but it has no benefit from a decrease in Emirates Interbank Offered Rate (EIBOR).
Variable rate mortgage
Contrary to fixed-rate mortgages, variable rate mortgages offer interest rates that fluctuate based on EIBOR. It’s a suitable option for those with financial liquidity to navigate EIBOR fluctuations. You can have potential savings if EIBOR falls, but it’s difficult in budgeting due to interest rate fluctuations, and it has higher monthly payments with a rise in EIBOR.
Remortgage
Remortgaging involves replacing an existing loan with a new one, and is often done to cash out property equity or secure better terms. It’s a strategic move to lower monthly payments or access cash from home equity. It has lower monthly payments with a reduced interest rate or falling EIBOR, but with increased mortgage length and monthly payments.
Offset mortgage
An offset mortgage links more than one deposit account to the loan, making room for borrowers to make temporary overpayments using savings. While this facilitates early repayment, it’s important to note the higher variable interest rate and associated fees. There’s the potential for early mortgage repayment through higher monthly payments, but it does come with higher interest rate than conventional mortgages.
Investment mortgage
An investment mortgage is for purchasing real estate for investment purposes, aiming to create a new source of income through renting or selling the property. While it does have the potential for higher profits through investment, there are limitations due to limited availability from lenders.
Non-resident mortgage
As its name suggests, non-resident mortgage is designed for non-residents of the UAE. It typically funds up to 50 percent of the property value with a shorter repayment period and higher monthly installments.
Read: UAE announces new housing loan policies for citizens
How to apply for a home loan in Dubai
Step: Apply for home loan approval
You can start the process by scheduling an appointment with a bank representative in order to determine your maximum eligible loan amount. In this part, you will be providing your financial details including your income, expenses, debts, as well assets.
Step 2: Submit documents
Following pre-approval, submit required documents such as pay stubs, tax returns, bank statements, and Emirates ID for verification. It’s important to thoroughly review the documents you’re sending to ensure that you’re providing the correct information. The bank will also review your submitted documents to ensure that you have a good credit score and are capable of paying your home loan in Dubai.
Step 3: Fill out the application form
Once you’re done submitting the required documents, you will need to complete an application form detailing property information, desired loan amount, and personal details. The bank will meticulously review your application and documents for approval. If you meet the criteria, you will get your loan approved.
Step 4: Wait for approval
Within 2 to 4 weeks, expect a decision on your home loan application. If approved, you’re one step closer to realizing your dream home in Dubai.
How to know if you’re eligible for a home loan in Dubai
To qualify for a home loan in Dubai, here are the basic criteria you need to keep in mind:
- You need to be at least 21 years old. However, it’s also important to note that some banks may require you to be 25 or older).
- You must hold a valid residency visa. While both residents and non-residents are allowed to apply for a home loan, non-residents are typically required to make a larger downpayment.
- You must be able to demonstrate that you have a stable income, good credit, and a sizable down payment.
How to choose the right home loan
There are plenty of options when it comes to getting a home loan in Dubai. However, here are some points you have to take note of if you want to make an informed decision:
Evaluate your financial situation
Understand your overall financial status, evaluating your income, expenses, and potential changes in the future. This assessment will guide you in selecting a home loan that not only fits your current financial status but also accommodates any future financial adjustments.
Research and be informed
It’s best to get the right information before jumping in and getting a home loan. Research different banks, comparing interest rates, loan terms, eligibility criteria, and charges.
You can also seek advice from mortgage advisors to determine your borrowing capacity based on your income and expenses.
Negotiate and discuss to get the best deals
When you set a meeting with your bank, you can discuss if there’s room for more flexible repayment options, lower fees and if it’s possible to have the prepayment charges waived to bring down the total cost.
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