What is a Mortgage and a Non-Resident Mortgage in Dubai Real Estate?
- Created Date 2023-01-28 16:27:13
What is a Mortgage? A mortgage is an agreement between a lender and borrower whereby the lender gives the borrower a specific amount to pay for a property and the borrower agrees to repay the loan with interest over a defined period of time. In the event of a default, the lender has the power to confiscate the property. In the UAE, the median mortgage loan term for salaried individuals is 25 years, or until they reach retirement age of 65. (70 for those who are self-employed).
LTV (Loan-to-value ratios) for Mortgage in the UAE:
The UAE Mortgage Law stipulates that foreign nationals purchasing their first home in Dubai must make a 20% down payment on properties up to AED 5 million and a 30% down payment on properties above AED 5 million.
Only up to 35% of the value of a non-property can be financed by the majority of banks in the UAE. First-time resident bonuses are restricted at 5% for UAE nationals, while future mortgages and LTV ratios for houses that are currently under construction are capped at 50%. It should be noted that these costs are subject to change.
Taxes
Although there is no property tax in Dubai, some expenses might still be necessary.
Non-Resident Mortgage
People can purchase real estate in Dubai even if they don't currently dwell there thanks to a sort of loan known as a non-resident mortgage. Generally, applicants must be between the ages of 21 and 70, citizens of one of the countries on the financial institution's approved list, and self-employed or salaried individuals must earn at least AED 20,000 per year after tax deductions. Age, citizenship, and income are just a few factors that affect a person's eligibility for this type of mortgage. But it's important to remember that some institutions can have additional age restrictions.
Pros of a Non-Resident Mortgage
- 1. Foreign investors can release working capital with the use of non-resident mortgages.
- 2. Loans used to finance off-the-plan initiatives, such as purchasing property or constructing a new structure, frequently come with interest-only repayment arrangements.
- 3. You must pay interest on the loan's principle under this repayment schedule.
- 4. During the interest-only phase, no capital is paid back; the entire payment is used to pay the loan's interest.
- 5. In Dubai, financial institutions typically provide interest-only repayment plans with a five-year maximum period.
- 6. You will be obliged to return the loan's principle in full at the end of the term, or else the loan will be refinanced into an option with a protracted repayment period.
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Published Date
2023-01-28 16:27:13