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UAE: How expats can take out mortgage loans; minimum salary, age limit, documents – News

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UAE: How expats can take out mortgage loans; minimum salary, age limit, documents – News

With a booming real estate market, the UAE territory is home to a variety of homes across the emirates, ranging from different types of apartments to villas. Off-plan real estate has also become famous among the residents of the country in recent times.

Home and mortgage loans are quite popular among those interested in investing in real estate in the country. In the UAE, expats are also eligible to take out mortgage loans, provided they meet certain requirements.


From minimum salary requirements to repayment frequency, here’s how expats can get mortgage loans in the UAE.

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Types of mortgages

  • Fixed Rate Mortgage: This type of loan offers a fixed interest rate for a set period of time, meaning the monthly payments will be the same over the period. This period can be up to five years.
  • Short-Term Mortgage: Short-term mortgage is when borrowers opt for a fixed-rate mortgage but for a shorter period of time, such as one to three years.
  • Long-term mortgage: Loans with a term of almost five years are considered long-term mortgages.
  • Variable rate: Variable rate, on the other hand, changes depending on the rate offered by EIBOR during the chosen period.

Rates ratio

There are various ratios that banks and financial institutions in the UAE use to calculate a borrower’s loan amount. This also helps them know if individuals are eligible for loans. These are as follows:

Debt Burden Ratio (DBR)

The Debt Burden Ratio (DBR) is the ratio of the borrower’s total monthly outgoing payments to his/her total income.

Banks and financial institutions in the UAE may set a “maximum DBR of 50 percent of gross salary and any regular income from a defined and specified source at any time,” the UAE Central Bank said.

If the loan repayment schedule extends beyond the expected retirement age, lending institutions must ensure that the then outstanding balance can be continued at a DBR of 50 percent of the borrower’s post-retirement income.

If the property being mortgaged has an investment purpose, lenders will deduct a minimum of two months’ rental income from the DBR calculation to assess the borrower’s repayment capacity, taking into account non-rental periods.

Loan-to-value ratio (LVR)

The Loan to Value ratio measures the value of the loan compared to the value of the property. For expats, the maximum loan-to-value ratio is as follows:

  • In the first home/owner-occupier category, each borrower can only claim one home.
  • For a property worth less than Dh5 million, the borrower can claim up to 80 percent of the property’s value.
  • For a property worth more than Dh5 million, the borrower can claim up to 70 percent of the property’s value.
  • In the case of a second and subsequent home or investment property, borrowers can claim 60 percent of the property, regardless of its value.
  • For off-plan properties, the maximum LTV for mortgages on properties being purchased is 50 percent, regardless of purpose, value or category of buyers. This is due to the long-term nature of the development process and the higher risk of completion.

Eligibility

  • Applicants must be at least 21 years old. In 2019, the UAE Central Bank relaxed certain mortgage loan requirements. This lifted the previously existing maximum age limit of 70 years at the last mortgage repayment. The maximum age limit can now be determined by lenders based on their risk management and policies.
  • The amendments had also changed the early or partial settlement fee for home loans from 3 percent to 1 percent of the outstanding balance, or Dh10,000, whichever is lower. The reduction in tariff will be a welcome benefit to customers as it provides them with greater affordability and accessibility.
  • Most banks require a minimum salary of Dh15,000.
  • Both employees and self-employed people can apply for a mortgage loan.

Documents required

Banks in the UAE may have certain different requirements when it comes to applying for a mortgage loan. Some of the basic requirements are as follows:

Salaried individuals

  • Copy of passport
  • Copy of Emirates ID
  • Salary certificate
  • Bank statements with a specific term, usually six months
  • Pay slips of a certain duration

Self-employed

  • Copy of passport
  • Copy of Emirates ID
  • Copy of trade permit
  • Bank statement
  • Memorandum of association
  • Audited company finances for a specific period

Documents from co-borrowers

  • Copy of the co-borrower’s passport
  • Copy of Emirates ID
  • In certain situations and if applicable, the co-borrower may be asked to submit his income documents, income documents, pay slips, bank statement, MOA and trade license.

Important things to know

  • The maximum term of a mortgage loan is 25 years.
  • The DBR may not exceed 50 percent.
  • The maximum amount of financing allowed for expats is up to seven years of their annual income.
  • When it comes to repayments, customers must repay from their salary or verifiable business or rental income. Borrowers may not use the ‘End of Service Benefit’.
  • The repayments must be paid at a frequency of at least quarterly.
  • With the exception of mortgage loans with differential principal repayment, principal and interest payments must be made on a decreasing balance basis.
  • Mortgage loans with deferred principal repayment only apply to investment loans. With these loans, the principal amount cannot be repaid for more than five years after the date of initial withdrawal of the loan.

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