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35% of buyers in Dubai opted for mortgages, with more than 23% of them being end-users

Despite rising rates, Dubai’s real estate market is booming. This guide empowers first-time homebuyers to navigate the mortgage process, tackle down payments, understand loan options, and secure their dream home

35% of buyers in Dubai opted for mortgages

Despite inflation reaching its peak and interest rates hitting a 10-year high, the real estate market in Dubai continues to flourish, making it an ideal time for long-term settlement. This market growth has also spurred strong demand for mortgages, with a notable increase in volumes. Interestingly, 35% of buyers in Dubai opted for mortgages, with more than 23% of them being end-users.

Whilst purchasing a real estate unit might not seem intimidating, first-time homebuyers face unique challenges, especially in securing a mortgage. Understanding these challenges and misconceptions is crucial for successfully navigating the process. The primary obstacle for first-time buyers is raising the necessary down payment, determined by the property’s value and known as the loan-to-value ratio (LTV). This required down payment varies from 20% to 30% of the purchase price, accompanied by additional fees totalling approximately 7.5%. For first-time buyers acquiring properties below AED 5,000,000.00, a minimum down payment of 20% is mandatory, whereas for properties above this threshold, a 30% down payment is required. Subsequent property purchases, such as second homes, necessitate a 40% down payment.

To qualify for a home loan in the UAE, both UAE nationals and residents must have a minimum monthly salary of AED 10,000. Expatriates also need to have at least three years of employment history in the UAE, with a minimum of one year in their current position. Additionally, applicants must ensure they are within the age limit of 65 years for salaried individuals and 70 years for self-employed individuals at the time of loan maturity.

In March 2020, the Central Bank of the United Arab Emirates (CBUAE) issued a decree allowing all banks to increase the loan-to-value ratio (LTV) by 5% for first-time buyers. This means that expats in Dubai can now borrow up to 80% of their property purchase price on properties that cost AED 5 million or under.

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Understanding mortgage types is critical for first-time buyers. Fixed-rate mortgages offer stable interest rates over a specified period, ensuring predictable monthly payments but potentially missing out on lower rates. Conversely, variable-rate mortgages fluctuate based on the Emirates Interbank Offer Rate (EIBOR), offering advantages during low EIBOR periods but carrying the risk of increased payments if rates rise.

One common myth is that everyone qualifies for the lowest interest rates. However, eligibility criteria vary among banks based on factors such as salary, employer, and credit score. Consulting a mortgage advisor helps in understanding the best rates and overall costs. Improving chances involves maintaining a good credit score, managing debts responsibly, and seeking guidance from a mortgage advisor who can match with suitable products. Credit scores and financial history play a significant role in mortgage approvals, with banks prioritising applicants who demonstrate financial responsibility and the ability to manage long-term commitments.

Jeffrey De Souza, Head of Financial Services at Lomond Financials Services stated, “To guard against scams or predatory practices, first-time buyers should engage reputable mortgage consultants who can guide them through the process transparently and ethically.”