Mortgages Explained for First Time Buyers in Dubai

mortgages explained for first time buyers

Mortgages Explained for First Time Buyers in Dubai

Mortgages Explained for First Time Buyers in Dubai

Dubai is a fantastic city that has a lot to offer expats across the globe. With stunning properties, great value for money, tax benefits, idyllic scenery, a strong community spirit and a lifestyle like nowhere else in the world, the city is becoming more and more popular by the day.


If you’re looking for somewhere permanent to stay in Dubai, then you may want to consider purchasing your own property over renting. However, we know mortgage help for first time buyers can seem more confusing than anything else when you’re in a completely different country with its own rules and regulations.


To help you get to grips with how the process works over here in Dubai, we’ve explained how mortgages work for first time buyers.

What is a Mortgage?



A mortgage is a loan you receive from a money lender that allows you to purchase property. The loan is secured against the value of your home until it has been paid off in full.


The amount of money you will be able to borrow depends on the value of the property you’re looking to purchase. This is known as the loan to value ratio (LTV).


In March 2020, the CBUAE (Central Bank of United Arab Emirates) issued a decree which allowed all banks to increase the LTV ratio 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.


As an example, if you were to purchase a townhouse in Town Square with a price of AED 1.55 million, you would be able to borrow AED 1.24 million from a money lender.


If you’re purchasing your first property and the price is above AED 5 million, expats would be allowed to borrow up to 70%. So, for a property that costs precisely AED 5 million, a lender can offer you AED 3.5 million.


What Mortgage Types are Available?



As a first time buyer, you may be surprised to hear there are two main mortgage types you can choose from: fixed rate and variable. Determining which option provides the best mortgage rates for first time buyers depends on a variety of circumstances. Let’s take a closer look at each one:


Fixed Rate Mortgages

A fixed rate mortgage is where the rate of interest you pay stays the same over a specific time period. This is usually between one and five years. Once your fixed term ends, you will be moved onto a reversion rate — also known as a follow-on rate.


The main advantage of a fixed rate mortgage is predictability. During the length of your mortgage, you will know exactly how much money is coming out each month, making it easier to work around your budget. A disadvantage, however, could be that you miss out on more competitive rates, particularly if you opt for a longer term.


Variable Rate Mortgages

A variable rate mortgage means the rate you pay can either increase or decrease. This will depend on the EIBOR — the Emirates Interbank Offered Rate — which is the rate that banks lend to each other, alongside a fixed percentage added by your lender.


This type of mortgage certainly has its positives and negatives. If the EIBOR rate is low, you will save money. If it rises, the interest rate you pay will rise, too.


What are the Best Mortgage Rates for First Time Buyers?

There’s no way of telling which is best for you without taking an in-depth look at all the variables involved. The best mortgage rates for first time buyers will depend on a range of circumstances. When deciding on a mortgage payment structure, lenders take the following into account:


  • The value of your property
  • How much you’re looking to borrow / your deposit
  • Your employment status and salary
  • Your regular spending habits
  • Your credit rating
  • If you have any existing debt


To get the best advice, speak to an independent mortgage broker who will be able to explain the mortgage process for first time buyers in greater detail.


Are There any Restrictions to Keep in Mind?



While they aren’t restrictions as such, expats might find applying for a mortgage to be a little trickier depending on where they are buying and the lender’s rules.


Most lenders will ask that you have been in your current job role for at least six months, and self-employed borrowers will need to have run their business for at least two years.


There is an age cap on the loan term that banks will enforce. For salaried applicants, the loan term must finish before you turn 65, and for self-employed applicants, it is 70.


You will also need official documentation to apply for a mortgage. This includes:


  • A copy of your passport
  • Proof of residency in the UAE and your current address
  • Financial documents such as wage slips and bank statements


You will also have the option to pay your mortgage off early if you’re able to. Alongside the repayment, you will have to pay an early settlement fee, which will be either 1% on the outstanding mortgage or AED 10,000. You will always pay whichever amount is the least.


Mortgage Help for First Time Buyers


Expat Mortgage provides expert mortgage help for first time buyers in Dubai. Our business was set up to help expatriates live the life they’ve always dreamed of. We know the legal and financial aspects involved with purchasing property can take some of the wind out of your sails, which is why we make arranging a first time mortgage as hassle-free as possible.


We’ll help you understand the process out here in Dubai while keeping jargon to an absolute minimum, we’ll approach the banks on your behalf, and we’ll source the best mortgages that suit your needs. If any point there’s an aspect you don’t understand, our fully trained mortgage brokers will take the time to explain it to you as clearly and concisely as possible.


What’s more, you could save thousands of dirhams by coming to us instead of directly to the bank. Thanks to the strong relationships we have built with the banks of Dubai, our clients save an average of AED 150,000 over the duration of their mortgage. That’s the equivalent to £30,000 at the time of writing.


So, if you’re a first time buyer looking to arrange a mortgage, make sure to get in contact with a member of our team.