Mortgages in Dubai: what a bank will lend and what it costs

How much a bank can lend

The Central Bank of the UAE sets the maximum share of a home's price a bank may lend. Three things decide it: whether you are an expatriate or a UAE national, the price, and whether this is your first home or a second one.

These are ceilings. A bank may lend less, and it decides case by case on your income, your debts and the home itself.

The AED 5 million line refers to the price of the home, not the size of the loan. A first home at AED 5 million or less carries the 80% cap for an expatriate; above that line the cap is 70%. A second or investment home carries 60% whatever its price, and an off-plan home 50% for everyone.

On a first home at AED 2,000,000, an expatriate may borrow up to AED 1,600,000. A UAE national may borrow up to AED 1,700,000. On a second home at the same price the figures fall to AED 1,200,000 and AED 1,300,000.

The deposit each limit implies

Whatever the bank does not lend, you pay. The minimum deposit is the mirror of the cap.

The buying fees come on top of the deposit. On a ready home they are about 7% of the price with cash, and a loan adds its own fees, listed below. The buying costs calculator shows the cash you need for any price and loan, and the cost of buying property in Dubai explains each fee.

Take an expatriate buying a first home at AED 2,000,000 with the full 80% loan of AED 1,600,000. The deposit is AED 400,000. The calculator puts the fees, with the DLD registration and the bank's valuation and arrangement fees, at about AED 155,940. The cash you need on the day is therefore about AED 555,940, before moving and furnishing.

Mortgages for non-residents

You do not need to live in the UAE to borrow from a UAE bank. The Central Bank's caps do not set the figure for non-residents; each bank sets its own policy. Banks commonly lend 50% to 60% of the price on a ready home, and 50% on an off-plan home.

Ask the bank for its non-resident terms in writing before you make an offer, so the deposit you plan for is the deposit you will need. A mortgage is an option, not a requirement: a non-resident can buy with cash and identify themselves with a passport at the registration trustee. Buying property in Dubai from abroad covers the rest of the process for a buyer overseas.

Term, age and the 50% rule

• Term: up to 25 years
• Age: each bank sets the age by which the loan must be repaid. Many use about 65 for salaried borrowers and 70 for the self-employed
• Debt burden: all your monthly debt repayments, the new mortgage included, may not exceed 50% of your income

The 50% rule is the one that limits most borrowers. A car loan or a credit card balance counts against it, so clearing smaller debts before you apply can raise what the bank will lend. The mortgage calculator shows the repayment on any loan, rate and term, and the income that repayment needs.

A shorter term means a higher monthly repayment and less interest over the life of the loan. A longer term, up to the 25-year limit, lowers the repayment and makes the 50% rule easier to meet.

The rule works in both directions. A repayment of AED 10,000 a month needs an income of at least AED 20,000 a month if you have no other debts. If you already pay AED 2,000 a month on a car loan, the mortgage repayment may take no more than AED 8,000 of that income, so the bank lends less or asks for a longer term.

What a mortgage costs

There is no Central Bank cap on arrangement fees, so compare them between banks. Registration and a 1% arrangement fee together add about 1.3% of the loan, plus the valuation fee.

The early settlement cap matters if you expect to sell or refinance within a few years. Read that clause in the final offer before you sign.

On a loan of AED 1,600,000, the DLD registration fee is AED 4,270. A valuation at AED 3,000 plus VAT costs AED 3,150, and an arrangement fee of 1% plus VAT costs AED 16,800. The three together are about AED 24,220, on top of the fees you would pay buying with cash.

What to compare between banks

The Central Bank sets the caps, the term and the debt rule, and they are the same at every bank. The things that differ between banks are the ones to compare.

• The arrangement fee. There is no cap, and the range of 0.5% to 1% plus VAT is a wide one on a large loan
• The valuation fee. Typically AED 2,500 to 3,500 plus VAT, and paid whether or not the loan goes ahead, so ask
• The age limit. Each bank sets the age by which the loan must be repaid, which decides the longest term it will offer you
• The early settlement terms. The cap is 1% of the balance or AED 10,000, whichever is lower, but read how each bank applies it
• Non-resident terms. If you live abroad, the share of the price each bank lends is its own policy, commonly 50% to 60%
• Off-plan projects. Each bank decides which projects it lends on, so ask about the specific project early

The order to do it in

1. Get pre-approval.Before you view, the bank checks your income and debts and tells you the most it will lend. Your offer then rests on a figure the bank has confirmed.
2. Make your offer and sign Form F.Set a transfer date in Form F that leaves time for the valuation and the final offer.
3. Valuation.The bank values the home. If the valuation is lower than the price, it lends against the lower figure, and the difference comes from you.
4. Final offer.The bank issues its final offer, with the rate, the term and the fees. Read the early settlement terms before you sign.
5. Transfer.At the registration trustee the bank pays the seller its share, and its mortgage is registered against your title deed for 0.25% of the loan plus AED 270.

What Enesco does for you here: we help with the mortgage alongside the search, and we set the transfer date in Form F around the bank's steps so the two do not collide. The adviser who shows you the home stays with you through the mortgage and the transfer.

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Questions buyers ask