Are you thinking about taking the plunge and buying a property in the UAE? Whether you are looking for a new home for yourself or an investment property, there are things you should consider before you apply. Read our mortgage expert's advice for what to think about before you take the next step or check out our mortgage frequently asked questions.

Affordability

Assessing your affordability is paramount if you are to successfully apply for a Dubai mortgage or a mortgage in Abu Dhabi.

How much you can borrow will depend on circumstances like whether you are looking to purchase as a resident or non-resident; expat or UAE national. It will also depend on your monthly outgoings and income. Checking your affordability and how much you could borrow will help you have realistic expectations before you start your property search.

You will need a deposit upfront. As a minimum, and as an expat looking to buy a property under AED 5 million, you'll need a 20% deposit. If you're a UAE national, you'll need a 15% deposit. If the property value is over AED 5 million and you're an expat, you'll need a 30% deposit or 25% as a UAE national.

You will also need to think about additional costs such as mortgage broker and real estate fees.

Using a mortgage calculator like Holo's will give you an understanding of how much you could borrow and how much you will need as a deposit.

Type of rate

The first thing you'll want to think about when it comes to Dubai mortgage interest rates is whether you want a Fixed or Variable rate mortgage.

A fixed-rate means that the rate of interest on the mortgage you pay stays the same for a specific period of time, normally between 1-5 years. During this period of time, your mortgage rate and your monthly repayment will not change.

The benefit of a fixed-rate mortgage is that you can effectively budget each month for a set period of time. After your fixed-rate period ends, you will automatically move to the bank's variable rate or you can explore a buy-out or remortgage option to see what other options may be best for your financial needs.

A variable rate mortgage means the interest you pay will vary over time. Variable rate mortgages are linked to the EIBOR. The EIBOR is a benchmark interest rate for lending between banks in the UAE with a percentage fixed by the bank. Most banks will adjust the variable rate every three months. You may find that some banks offer variable-rate mortgages on a monthly or six-month basis but this is less common.

The benefit of a variable rate mortgage is that if interest rates are low you will be able to benefit from the low EIBOR rate, unlike a fixed rate where the amount of interest you pay does not change.

You may think that your best option for a mortgage is to apply directly with your bank. There is no guarantee your bank will be able to offer the best rate. That's why it's a great idea to research the market to ensure you are getting the best deal for your financial situation.

Paying down any debt

If you are thinking about buying a property, then you should now start to think about reducing debt. Where possible start paying off your credit cards, and reduce your spending on them. You should aim to not spend more than 30% of your credit card limit. You should also try to pay off any existing personal loans. Lenders will take into consideration how much credit you presently have access to and are utilizing as a part of the application process.

Changing jobs

Lenders will want to see that you have steady employment and income. On application, you will be asked to provide a copy of your salary certificate, six months of pay slips, and six months of bank statements. If you are self-employed you will need to provide six months of personal bank statements, 12 months of business account statements, and two years of audited financials.

So if you are thinking about changing jobs, it may be a good idea to wait until you are out of any probation period with your employer before applying for your Dubai mortgage, or waiting to change jobs until your mortgage is secured.

Of course, there will always be instances where this is not possible, and banks will not automatically dismiss your application if you are changing jobs. It's a great idea to speak to one of our mortgage consultants who can walk you through your options.

Using a mortgage broker can add extra costs to the home-buying process, but our service is always 100% free.

Checking your credit score

You should always want your credit score to be as healthy as possible. A lower credit score will not automatically stop you from getting a mortgage; a higher score may get you a more preferential interest rate on your mortgage. You can check your credit score in the UAE with the AECB (Al Etihad Credit Bureau) and then take steps to improve it. Make sure your bills are paid on time and you have no outstanding debts with utilities or telecom providers. In addition, make sure you've followed our earlier tips for paying down debt and reducing credit card spend.

Getting a mortgage in the UAE does not need to be stressful. With the right information and a good understanding of the costs involved, you can make the best choice for you. Remember Holo is here to help you from start to finish.

Get started for free

This blog is for educational purposes, but everyone's case is unique, and local guidelines and regulations may change. Our mortgage advisors can help you with any question you may have and have the latest advice. Get in touch.