The one sector that has benefitted the most from the rapid economic growth of Dubai is the real estate sector of Dubai. The standard of living, secure environment and the business opportunities provided by Dubai have made it a hub for real estate investments from around the world. Like all real estate markets around the world, Dubai’s real estate market has also seen fluctuations from time to time but it remains a robust, lucrative and popular choice for both local and international investors.
Understanding property mortgage finance in Dubai becomes important for every investor who wishes to invest in the vibrant real estate market of Dubai. It is important to understand that to filter out the property of choice and to get the right mortgage deal on it, the help of a local and experienced consultant is required. Whether you’re a first-time buyer or an experienced investor professional advice can help you achieve your property goals easily in Dubai. A reputed consultant company like ’GrowBiz’ can help an investor find the right property at the right price and can also help with getting the best property mortgage finance deal on it. We will now try to get an insight into the types of mortgages, application process and eligibility criteria of the mortgage finance landscape of Dubai.
Types of Mortgages
- Fixed Rate Mortgage: In fixed rate mortgage the interest rate on the loan remains constant or fixed thus providing for a fixed amount to be paid every month in repayment installments throughout the loan term.
- Variable Rate Mortgage: In variable rate mortgages the interest rate is not fixed and can vary according to the variations in economy. This leads to the monthly repayment installment amount to vary accordingly.
- Islamic Mortgage: Islamic mortgage is based on profit sharing agreements instead of interest. Some of the common financial products of Islamic mortgage are Murabaha and Ijara which are cost and financing products and leasing products respectively.
- Interest Only Mortgage: In an interest only mortgage only interest amount is paid by the borrower for a fixed period of time initially and after this fixed period both the interest amount and principal are paid back together.
Eligibility Criteria
- Age: Age is an important criterion for mortgage loans with the lower limit being 21 years, the banks usually restrict the mortgage maturity age to 65 to 70 years.
- Income: Mortgage loan applications are not entertained without proof of a stable income, it can be in the form of salary slips or business cash flow statements.
- Credit History: A good credit history is very important as it ensures the banks and financial institutions the ability of the borrower to repay the mortgage loan responsibly.
- Employment: If the borrower has a steady job with a good company it assures the bank or any other lending institution of the successful repayment of the mortgage loan.
- Down Payment: For residents of Dubai a down payment of 20% to 25% of the loan amount is required while for nonresidents this percentage can get higher.
Application Process
- Pre-Approval: It is advisable to get a pre approval from a bank before looking for the property to buy as it gives an assessment of the amount the bank is ready to approve as a mortgage loan to a borrower based on the credit history and financial position of the borrower.
- Application: A formal application for a mortgage loan is made to the bank which has already given a pre approval. This application is accompanied by documentation like proof of income, credit history etc.
- Property Valuation: The bank before the final approval of a mortgage loan does a valuation of the property to be bought by the borrower. After the valuation, the bank issues a formal offer to the borrower.
- Documentation: After the acceptance of the formal offer of the bank by the borrower, all the legal documents like mortgage deed and property transfer documents are prepared.
- Disbursement: After all the appropriate documentation is done the bank disburses the mortgage amount to the owner of the property, which completes the property purchase of the borrower.