19 Sept 2023

  • Insurance & Protection
  • Consumer Advice

Mortgage Approval in the UAE: Your Essential Guide to Unlocking the Door to Your Dream Property

In this article, we outline the key factors to consider when applying for a mortgage in the UAE.

4 mins. read

Navigating the mortgage landscape in the United Arab Emirates (UAE) can be an interesting endeavour, especially for first-time homebuyers and expatriates. With a range of lenders, interest rates, and regulations, it's essential to understand the process and make informed decisions. In this article, we outline the key factors to consider when applying for a mortgage in the UAE.

Assess your eligibility

Before applying for a mortgage, ensure you meet the basic eligibility criteria set by UAE lenders, which typically include:

a) Minimum age requirement: Usually, borrowers must be at least 21 years old.

b) Income and employment stability: Lenders require proof of steady income and employment, typically for at least six months with the same employer.

c) Credit history: A good credit score and history are crucial for obtaining a mortgage with favourable terms.

Choose the right lender

The UAE offers a variety of lenders, including local and international banks and financial institutions. To find the right lender, consider the following:

a) Interest rates: Compare fixed and variable interest rates, as well as the associated terms and conditions.

b) Lender reputation: Research the lender's reputation, customer service, and previous client experiences.

c) Flexibility: Some lenders may offer flexibility in terms of early repayment, loan tenure, and grace periods.

Understand the types of mortgages

There are two primary types of mortgages available in the UAE:

a) Conventional mortgage: This is a traditional mortgage where the borrower repays the principal and interest over the loan tenure.

b) Islamic mortgage: Also known as Murabaha or Ijarah, this is a Sharia-compliant mortgage that adheres to Islamic finance principles.

Evaluate your personal preferences, religious beliefs, and financial goals when choosing the right mortgage type.

Calculate your down payment and loan-to-value ratio

In the UAE, lenders typically require a down payment of 20% to 25% of the property's value, depending on your residency status. The loan-to-value (LTV) ratio represents the percentage of the property's value that the lender is willing to finance. A lower LTV may result in more favourable interest rates and repayment terms.

In the UAE, the required down payment depends on your nationality and the property's value:

a) UAE nationals: A minimum down payment of 20% for properties valued at AED 5 million or less, and 30% for properties valued above AED 5 million.

b) Expatriates: A minimum down payment of 25% for properties valued at AED 5 million or less, and 35% for properties valued above AED 5 million.

Factor in additional costs and fees

When applying for a mortgage, it's essential to budget for additional costs, such as:

a) Processing fees: Lenders may charge a processing fee, typically around 0.25% to 1% of the loan amount.

b) Property valuation fees: Lenders require a property valuation, which can range from AED 2,500 to AED 5,000.

c) Mortgage registration fees: Payable to the land department, these fees are usually 0.25% of the loan amount.

Secure mortgage protection insurance

Mortgage protection insurance is mandatory for mortgages in the UAE. It provides coverage for mortgage repayments in case of unforeseen circumstances, such as job loss, disability, or death. The Central Bank of UAE allows you to purchase mortgage protection from your preferred insurer.

Consider policies with flexible premium options, comprehensive coverage, and additional benefits, such as HAYAH's Loan Protect policy, which offers:

a) Coverage against loss of life, terminal illness, and disability for between 1 and 35 years.

b) Premium payment options in AED or USD, with monthly, annual, or single premium frequencies.

c) Coverage up to USD 50,000,000.

d) Unchanging premiums during the term of the policy.

e) Free temporary life cover from the time you fill in the application form until the policy is issued.

f) Added benefits such as HAYAH's Priority Screening.

By securing a comprehensive mortgage protection insurance plan like HAYAH's Loan Protect policy, you will have peace of mind knowing that your mortgage repayments are covered in case of unforeseen circumstances. This not only ensures your financial security but also protects your loved ones from the burden of repaying the mortgage in difficult times.

Navigating the UAE mortgage market can be challenging, but with the right information, you can make informed decisions that align with your financial goals. By understanding eligibility criteria, mortgage types, down payment requirements, interest rates, loan tenure, additional costs, and the importance of mortgage, you can protection insurance, you can confidently embark on your journey to homeownership in the UAE. Remember to compare different mortgage offers and choose a mortgage protection plan that best suits your needs, such as HAYAH's Loan Protect policy. With careful planning and consideration, you'll be well on your way to securing a mortgage that fits your financial situation and helps you achieve your dream of owning a property in the UAE.

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