How to buy a property in the UAE with a mortgage in 2021? | Ax Capital

How to buy a property in the UAE with a mortgage in 2021?

For those who want to buy a house in the United Arab Emirates, but have a very limited budget, local banks can help by issuing a home loan.

The UAE banks can offer home loans to both local residents and foreign buyers.

So, how can you get a home loan in the UAE in 2021? What documents do you need? How do you apply for a resident visa after buying an apartment? Here is everything you need to know about the process.

How to apply for a mortgage in Dubai if you are a foreigner

Investors from other countries do not have to pay the seller the full price at the time of purchase. A local financial institution can do this for the buyer.

Nowadays the mortgage lending market is becoming increasingly popular in the metropolis; in fact the popularity of buying and selling a house on credit has doubled since 2016. In 2019, people made more than half of all purchases (55%) with a mortgage. However, it’s not only local, but also foreign citizens who can buy residences using credit.

Under what conditions can residents of other countries apply for a loan? We will talk about this in the next chapter.

Mortgage loans for foreigners – the key requirements

Banks usually have the following prerequisites for foreign nationals:

The lender is obligated to obtain life insurance. Insurance costs approximately 0.3% of the loan amount.

A person must be at least 21 years old at the time of signing the contract with the bank.

The upper-age limit is usually set by the individual bank, but often lenders over the age of 55 are highly unlikely to secure a mortgage.

A home loan can be issued to foreigner at a rate of 6.5% to 9.5% per annum.

The term for which the loan is issued cannot be cannot be more than 25 years or less than 5 years.

The loan amount cannot exceed 90% of the cost of the acquired residence.

Obtaining a visa after buying a house

A residence permit (or a resident visa) can be issued after you buy a property costing more than $270,000. Even if a buyer receives a resident visa when buying a property valued at $270,000 or more, this does not entitle them to work within the UAE. Despite the value of the residence, the owner will still need to secure a work visa.

Even if a buyer receives a resident visa when buying a property valued at $270,000 or more, this does not entitle them to work within the UAE. Despite the value of the residence, the owner will still need to secure a work visa.

Necessary documents for obtaining a loan

Applicants have to provide the following file of documents to the bank:
  • A mortgage application form;
  • A photocopy of theassport;
  • A photocopy of the residence permit;
  • Copies of bank statements for the last six months;
  • If the borrower is employed – a character reference from their employer and a salary certificate;

If the applicant is self-employed they will need to supply a company profile detailing the nature of the business, copies of 2 years audited financial accounts, a copy of their Trade License, copies of financial accounts.

The bank will make its decision within 90-days. Next, the property transaction is registered with the UAE Land Department. It is worth noting that this can be done in lieu of both parties being present. The legal representatives of the buyer and/or vendor can attend the registration on the provision that a Power of Attorney is issued by the notary office.

Next, the property transaction is registered with the UAE Land Department. It is worth noting that this can be done in lieu of both parties being present. The legal representatives of the buyer and/or vendor can attend the registration on the provision that a Power of Attorney is issued by the notary office.

Additional expenses when applying for a loan

The buyer will be required to make certain outlays during the loan process.

A down payment of at least 10% of the loan.

The bank’s commission (at least 1% of the purchase amount).

Life Insurance costs (usually totalling about 0.3% of the total loan amount).

Mortgages in the UAE

Many local banks do business in accordance with the Sharia Law, which prohibits charging and paying interest.

However, some banks have uncovered two key loop holes in the Sharia regulations.

Firstly there is Murabaha. In this financial structure, one party buys goods for a set amount before selling it to a second party for deferred payments totalling a higher amount. This is similar to a conventional mortgage but because there is no debt with interest, the arrangement does not breach the law.

Secondly there is Ijara. Here, the buyer acquires their residence through the bank purchasing the property and renting it back to the buyer. This is difference from traditional real estate rental and ideal for those who may not have the money to buy a property at all.

Today, Dubai is the most popular destination in the UAE for buying a property. Experienced investors find that they are able to taken on more lucrative and profitable ventures due to the wide variety of benefits found when investing in properties in the local market.

The main advantages of investing in real estate

The advantages include:

Dubai is home to a rich, unique and vibrant array of architecture, with many skyscrapers being built on artificial islands offering a sense of unmitigated prestige.

Everyone from locals to expats to holidaymakers; including vast swathes of beaches to the winter vibes of skiing on artificial snow.

A main draw for property investors is the large number of tourists and travellers that visit the UAE every year. Therefore, the real estate market in the UAE offers the potential for high rental income; often in the region of 7-8% of the property value per annum.

Usually, a foreign investor can buy a property without any problems. Though, getting a mortgage loan can be rather challenging.

It is often less problematic and easier to obtain a loan or buy a property if the purchaser has a permanent source of income in the United Arab Emirates. Although some banks and loan companies will be willing to enter into a contract with foreign citizens if their finance is secured by a property.

If you are in a position to make a down payment of at least half the value of the residence, then it is more likely that your mortgage application will be approved.

The United Arab Emirates has fewer property taxes, which is why local real estate is so popular with both locals and foreigners.

Those who run their own business or work in the country are often more likely to buy real estate here as a second home or semi-permanent residence. These properties can also offer easy access for travel to Dubai and Abu Dhabi, which is another auspicious draw.

In addition, Dubai’s artificial islands are attracting more and more investors from different parts of the world, with developers citing that it may become more popular than Ibiza thanks to the plethora of hotels, nightclubs, cafés, restaurants and bars on the islands.

It will cost a minimum of $100,000 to become the owner of a residence on an artificial island in Dubai. However, as the islands are considered to be highly prestigious and are increasingly in demand from expats and travelers, if you choose to rent out the property it is likely that your income will escalate annually due to popularity.

According to statistics the number of tourists visiting this country every year is rapidly increasing. Experts believe that the peak traffic will be in 2021 (from October 1 to March 31, 2022), when the world exhibition Expo-2021 will be held in Dubai. The most experienced investors are already thinking about the profit that local homeowners will be able to make by renting out their apartments during this period. Investors are already buying houses today in order to earn income from renting them to tourists and entrepreneurs during the Expo exhibition, as well as reselling the property after the event ends.

An area near Sports City is enthusiastically being built up due to Expo-2021, and there is great focus on this freehold area by foreign real estate investors currently.

The disadvantages of buying a property in the UAE

The main disadvantage of buying a property here is that the purchasing procedure can be convoluted and not entirely straightforward. That being said, the process can be easier for Western European nationals than for residents of other countries.

However, this often does not deter buyers at all due to the fact that there are no risks for foreign investors here. There are no long-term construction projects, and thanks to the strict legislation, the chance to become a victim of property fraud is extremely low.

We can say that the United Arab Emirates is open to the whole world, because about 90% of the population are made up from expats hailing from the United States of America, Canada, Australia, and European countries.

Many expats choose to make their residential investments in the freehold zones of Dubai because this means, regardless of the property type, they have the rights to full ownership of the estate.

The most popular freehold zones in Dubai include

Palm Jumeirah;

Dubai Marina;

Downtown and other areas of Dubai.

We will help you become a house owner in the UAE

The property database of our agency offers excellent real estate rental deals in the best locations. Our agents are happy to help you choose the ideal apartment and provide legal assistance in preparing the necessary documents. Buy or rent a house in the United Arab Emirates with our team and get the best prices.