How Can Non-Residents Apply for Mortgage in Dubai?

Dubai is a paradise for people looking for a luxurious lifestyle in a well-developed and modern city. People from different walks of life move here—be it families who’re looking for a better life or career professionals who’re looking to boost their career options! People residing in Dubai for an extended period might get tempted to buy a home in Dubai. It is only evident because Dubai offers several benefits to foreign residents.

Let us give you the information you should know if you’re a non-resident looking to buy property in Dubai.

Can Non-residents Buy Property in Dubai?

This is one of the most common questions related to Dubai’s real estate market.

Foreign residents, including both the non-resident and expatriate residents, can buy property in Dubai on a freehold basis. The foreign nationals have the advantage to sell, buy, and even lease their property in Dubai. However, it is only in the designated zones outlined by the government of Dubai that the non-residents can purchase property on a freehold basis.

Where Can Non-residents Buy Property in Dubai?

The Dubai Law states that a non-resident can buy property in leasehold and freehold areas.

What Are the Benefits of Buying a Property in Dubai for Non-residents?

There are various benefits non-residents can enjoy upon buying a property in Dubai. If you are still debating whether to buy a property in Dubai or not, here are the advantages you can strategically enjoy when you invest in Dubai’s real estate.

High Rental Yield for Properties

Non-residents can enjoy benefits from high rental returns on their investment in Dubai. The villa properties in Dubai offer ROI up to 6%, and the apartment communities have rental yields up to 7.5%.

Competitive Property Prices

One of the most significant benefits a foreign investor can enjoy is the competitive prices for properties in Dubai compared to the other major cosmopolitan cities. Dubai is considered the best place to buy luxury yet affordable properties in the world.

Investor-Friendly Tax System

The tax system in Dubai is investor-friendly. This is another benefit for foreigners buying properties in Dubai. The UAE does not charge any taxes on purchased property or the rental income from these purchases. It allows overseas investors to enjoy both the benefits of buying a property in Dubai and healthy returns on their property.

A Residence Visa

Foreign nationals can obtain a residence visa by investing in buying a property in Dubai. The introduction of long-term visas in the UAE has made real estate investors with property worth AED 5M eligible for a five-year residence visa. There are, however, other essential criteria to meet!

Property Management Services

Some non-residents always look to purchase property in Dubai purely for investment purposes only. They can employ the services provided by property management services. It will help the non-residents to maintain their property and handle the legalities without any hurdle.

What Are the Eligibility Criteria for Buying Properties in Dubai for Non-residents?

Following are necessary eligibility requirements for mortgages that non-residents need to demonstrate:

The minimum salary requirements should typically be at least $2,700 (AED 10,000) monthly. An applicant who currently does not have any debt can expect a monthly payment of up to 50% of their monthly income. The applicant must be at least 21 years old.

Features of Mortgages for Non-residents

Following are some of the most common features for non-residents and foreigners:

Interest Rate: The interest rates depend on the bank you approach for the mortgage. An interest rate ranging from 4.5% to 6.5% per annum is charged based on a reducing balance.

Mortgage Amount: The exact amount a bank offers will be determined by the income or salary. Some banks are willing to offer up to AED 20 million for the purchase of residential properties.

Loan Value: Most banks offer from 50% to 75% funding to non-residents. Tenure: The tenure of mortgages can be for a minimum of 25 years.

Different Types of Mortgages Available to Non-residents in Dubai

Dubai has a very well-developed mortgage market. As a non-resident or foreigner, there will be two ways to apply for a mortgage in Dubai: either you have a home in Dubai or plan to live in rent or investment property! The deposit amount you will have to pay will substantially depend on the prevailing circumstances and the type of property you’re specifically interested in buying. The bank will usually ask for a higher initial deposit if you’re planning on buying an investment property since the risk will be higher in this case. The non-resident usually has to pay 40-50% of the price as a deposit for investment properties. The deposit amount for homes is usually less than 25% of the initial deposit.

As a non-resident, you will need to decide if you want a fixed rate or a variable rate product. The fixed-rate mortgages guarantee the same interest rate will be applicable throughout the entire duration of the agreement. On the other hand, variable-rate mortgages can cost more or less depending on the interest rate and the fluctuations.

Where to Get the Loan?

If you are a non-resident, you can arrange your loan from a bank or a broker. If you’re uncertain of your eligibility for a mortgage, it is always a good idea to take expert advice from an experienced and qualified broker.

Legal Documentation for a Mortgage for Non-residents

After the amendment of local laws in 2002, foreigners and non-residents can buy property in Dubai legally and apply for a mortgage. This led to an upsurge of non-residents purchasing properties in Dubai, mostly for themselves or to earn profit through rent!

Getting a mortgage in Dubai for non-residents depends on personal circumstances and the value of the property.

It will usually take a couple of weeks to arrange your mortgage in Dubai. However, it’s better to get early approval from the bank to confirm what you are about to lend.

Following is the paperwork you need to submit to the bank:

Copies of your passport

Proof of legal residence in Dubai

Evidence of current residential address

Documents to prove the affordability of the mortgage

Documents to prove creditworthiness

A Step-by-Step Process of Mortgage in Dubai

Following are the essential steps you’ll need to follow to get a mortgage in Dubai:

Step 1: Decide if you want to consult or use a broker to choose from various mortgage options.

Step 2: Choose the mortgage that fits your needs. After that, find a local lawyer who will help you with the transaction process.

Step 3: Hand over the paperwork requested by the bank to get a finance pre-approval.

Step 4: Find a property that fits your budget and agree with the seller on a fixed purchase price.

Step 5: Pay the advance deposits to secure your purchase and agree on a completion date accordingly.

Step 6: Provide the necessary documentation required to confirm your mortgage.

Fee Structure

Arranging a mortgage in Dubai will mean that you will need to pay back-to-back fees for both administrative and legal costs. The exact prices of fees applied will vary depending on the circumstances of the non-resident. However, when the amounts accumulate, it becomes a costly transaction.

When you are arranging a mortgage in Dubai, you will need to prepare yourself to pay a reasonably large deposit. And fees for the same will include the following:

Mortgage registration fee: 0.25% of the value of the mortgage.

Bank fees: This will include processing fee, property valuation fees, and insurance registration fee.

Loan protection insurance (mortgage life insurance): This loan is usually compulsory. However, the costs may vary depending on the value of your property, mortgage, and circumstances. Other costs and expenses: Depending on the situation, you might also find additional costs, both in taxes applied and the costs of arranging the loan. However, you need to deposit the significant initial outlay to pay for a secure loan and their sale. Buying an off-plan property could cost you up to 50% of the total cost.

No matter what your situation, if your main account is outside of Dubai, you will need to send money to yourself from abroad to pay fees and the incidental costs. If this is the case, you need to check what you’ll be charged with when making an international money transfer.

Banks in Dubai That Provide Mortgages to Foreigners

Almost all banks in Dubai offer mortgage products to non-residents. The banks provide mortgages with a reasonable choice of loans that are best suitable for foreigners and non-residents.

You can get a mortgage from the following banks and brokers:

The global banking giant HSBC offers a good and decent range of mortgage products in Dubai. It is best suited to non-residents and foreigners looking to invest in Dubai without actually living there.

A UAE-based bank known as Mashreq offers mortgage solutions for both residents and non-residents alike.

Another right choice for a wide range of mortgage and loan products is Emirates NBD.

How is Mortgage Affordability Calculated?

Different banks will calculate mortgage affordability differently. Nevertheless, there is a general rule of thumb that states only 50% of your monthly income will be taken into account when calculating the same.

From this 50%, the bank will deduct any other credit commitments you have (like car loans, personal loans, and approximately 5% of all your credit card limits) to find out your maximum affordability.

After that, the bank will carry out a stress test by applying a stress rate of interest, which will vary from 3.5% to 8%, depending on the bank. The aim of this is to confirm whether you will still be able to afford your mortgage repayments or not if the interest rates were to increase to the test level.

The Glossary of Important Terms Related to Mortgages Everyone Should Know

If you’ve already started to look for your perfect new place in Dubai, it will be beneficial to know this simple fact. Even though Arabic is the official language in Dubai, English is the most spoken language. Therefore, the banks and real estate agents have English websites, and it is likely for them to speak in English with no difficulty. However, keep in mind that the jargon can be a bit bewildering.

Here are some essential terms that most definitely will help you:

Loan-to-value (LTV) Ratio: A loan-to-value ratio or an LTV is the mortgage value expressed as a percentage of the total property value.

Repayment Mortgages: With a repayment mortgage, you will be able to pay back both the interest and the capital amount borrowed over the term.

Interest-only Mortgages: In Interest-only mortgages, you will need to pay only the interest accruing on the capital borrowed. The capital to be repaid in full at the end of the term.

Fixed-rate Mortgages: In fixed-rate mortgages, the interest rate is fixed for a set period. It is usually for a period of one, three, or five years. After this period, the product will revert to a ‘follow-on rate’ set by the bank.

Variable-rate Mortgages: A variable-rate mortgage is an amount you pay in interest. The bank can easily change this mortgage rate.

Buying a new home is a difficult task. It gets more complicated if the property is purchased in a foreign country. Many non-residents are buying properties in Dubai every year and have put down their roots in its soil. It is a matter of personal choice and the availability of capital to decide if they are willing to start a new life in Dubai.

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