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

Types of mortgages range from fixed to short-term, long-term and variable rates

Laraib Anwer

Published: Sun 27 Oct 2024, 3:03 PM

With a booming real estate market, the UAE's land hosts a variation of houses across all its emirates, spanning from different types of apartments to villas. Off-plan property has also risen to fame recently among the country's residents.

Home and mortgage loans are quite popular among those interested in investing in property in the country. In the UAE, expats are also eligible to take out mortgage loans, given that they adhere by certain requirements.

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From minimum salary requirements to frequency of repayment, here's how expats can take out mortgage loans in the UAE.

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Types of mortgages

Fixed-rate mortgage: This type of loan offers a fixed rate of interest for a period of time, implying that monthly payments will be the same during the period. This period can go up to five years.
Short-term mortgage: Short-term mortgage is when borrowers go for the fixed-rate mortgage but for a lower period of time, like one to three years.
Long-term mortgage: Loans that are close to the five-year mark are considered as long-term mortgages.
Variable rate: Variable rates on the other hand change depending on the offered rate by the EIBOR during the chosen period.

Rates ratio

There are different ratios which banks and financial institutions in the UAE use to calculate a borrower's loan. 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's total income.

Banks and financial institutions in the UAE are allowed to set a "maximum DBR of 50 per cent of gross salary and any regular income from a defined and specific source at any time," as per the Central Bank of the UAE.

If the loan repayment schedule extends beyond the expected retirement age, providing institutions need to ensure that the balance outstanding at the time can be continued at a DBR of 50 per cent of the borrower’s post retirement income.

If the property for which a mortgage loan is being taken is for investment purposes then loan providers will make a deduction of at least two months’ rental income from the DBR calculation to assess the borrower’s ability to repay, taking account of non-rental periods.

Loan to value ratio (LVR)

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

Under the first house/owner occupier category, each borrower can only claim one property.
For a property valued at less than Dh5 million, the borrower can claim maximum 80 per cent of the value of the property.
For a property valued more than Dh5 million, the borrower can claim maximum 70 per cent of the value of the property.
In the case of second and subsequent house or investment property, borrowers can claim 60 per cent of the property, regardless of its value.
For off-plan properties, the maximum LTV for mortgages on property being purchased is 50 per cent regardless of purpose, value, or category of purchaser. This is due to the long term nature of the development process and higher level of risk to completion.

Eligibility

Applicants must be at least 21 years of age. In 2019, the Central Bank of UAE eased certain requirements for taking out a mortgage loan. This lifted the previously existing maximum age limit requirement of 70 years at the last mortgage repayment. The max age limit now can be determined by lenders as per their risk management and policies.
The amendments had also changed the early or partial settlements fee of home loans from 3 per cent to 1 per cent of the outstanding balance, or Dh10,000, whichever is less. The reduction in the rate will be a welcome benefit for customers, offering them increased affordability and accessibility.
Most banks require a minimum salary of Dh15,000.
Both salaried as well as self-employed individuals can apply for a mortgage loan.

Documents required

Banks across 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

Passport copy
Emirates ID copy
Salary certificate
Bank statements of a certain duration, usually six months
Pay slips of a certain duration

Self-employed individuals

Passport copy
Emirates ID copy
Trade licence copy
Bank statement
Memorandum of Association
Audited company financials of a certain period

Co-borrowers documents

Passport copy of the co-borrower
Copy of Emirates ID
Under certain situations and if applicable, the co-borrower may be asked to provide their income documents, income documents, pay slips, bank statement, MOA and trade licence.

Important things to know

The maximum tenor of a mortgage loan is 25 years.
The DBR cannot exceed 50 per cent.
The maximum financing amount permitted 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 are not allowed to use of ‘End of Service Benefit’.
Repayments must be paid at a frequency of not less than quarterly.
Except for mortgage loans with differed repayment of principal, principal and interest repayments should be made on a reducing balance basis.
Mortgage loans with deferred principal repayment only apply to investment loans. These loans do not allow for non-repayment of principal for longer than five years from date of first drawdown of the loan.

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