A Comprehensive Guide to Mortgage Options for Expats in the UAE

With the UAE’s thriving real estate market, expats interested in investing in property have a range of mortgage options available. From apartments to villas, and off-plan properties, mortgage loans provide a flexible way to access the market. However, expats must meet certain eligibility criteria and submit essential documents to qualify for these loans. Here’s a breakdown of the different types of mortgages, eligibility, and requirements for expats in the UAE.

 

Types of Mortgages Available

1. Fixed-Rate Mortgage: The interest rate is fixed for a specific period, often up to five years, making monthly payments predictable during that time.

2. Short-Term Mortgage: Similar to fixed-rate mortgages but for a shorter duration, generally between one to three years.

3. Long-Term Mortgage: Mortgages with a fixed rate extending closer to the five-year mark.

4. Variable-Rate Mortgage: Here, the interest rate varies according to the Emirates Interbank Offered Rate (EIBOR), making it more flexible but less predictable.

    

Key Ratios and Limits for Mortgage Approval

• Debt Burden Ratio (DBR): The DBR calculates the percentage of the borrower’s income committed to monthly debt payments. According to UAE’s Central Bank guidelines, the DBR must not exceed 50% of the borrower’s monthly gross income. This cap applies even after retirement, as lenders may reassess repayment ability based on post-retirement income.

• Loan-to-Value Ratio (LVR): This measures the loan amount relative to the property’s value.

  • For a primary residence valued under AED 5 million, the LVR can reach up to 80%.
  • For properties above AED 5 million, the LVR is limited to 70%.
  • For a second property, the LVR is capped at 60%.
  • For off-plan properties, the LVR maxes out at 50% due to the extended development period and associated risks.

   

Eligibility Criteria

• Age: Applicants must be at least 21 years old. The previous maximum age limit of 70 years at the end of loan repayment has been lifted, allowing lenders to determine age limits based on their policies.
• Minimum Salary: Most banks require a minimum salary of AED 15,000.
• Employment Status: Both salaried and self-employed individuals are eligible to apply.

 

Documents Required for Mortgage Application

For Salaried Individuals:

• Passport copy
• Emirates ID copy
• Salary certificate
• Recent pay slips (may vary by bank)
• Six months of bank statements

 

For Self-Employed Individuals:

• Passport copy
• Emirates ID copy
• Trade license copy
• Company bank statements
• Memorandum of Association
• Audited financial statements

 

For Co-borrowers:

• Passport and Emirates ID copies
• Additional income verification documents (if required)

 

Important Mortgage Terms to Know

1. Loan Tenure: The maximum loan term is 25 years.

2. DBR Cap: The DBR must not exceed 50% of income.

3. Financing Limit: Expats can borrow up to seven times their annual income.

4. Repayment Terms: Payments must come from salary or verifiable business or rental income and be made at least quarterly. The end-of-service benefit cannot be used for mortgage repayments.

5. Deferred Principal Repayment: For investment loans, borrowers can defer principal repayments, but only for up to five years from the initial loan date.

 

Expats seeking mortgage loans in the UAE have a variety of options that cater to different financial situations. Ensuring compliance with eligibility requirements and submitting the correct documents will help applicants successfully secure their mortgage.

For any enquiries or information, contact ask@tlr.ae or call us on +971 52 644 3004. Follow The Law Reporters on WhatsApp Channels