Buying a property in the UAE can be daunting, especially for the first-time buyer. Expats have only been able to buy here since 2001, and only in specific areas, so many people are unfamiliar with the process as it can be quite different to a home country. As buying a home is the largest purchase most of us will ever make, it is important to get the facts.

I have an excellent in-house mortgage department and we can walk you through the full process from finding a property, getting mortgage approvals, the final offer, to dealing with the Land Department at completion.

This article is a guide to what you need to know when buying property in Dubai. I have already written an article on the buying process in the UK and there will shortly be another about the tax issues to consider in respect of UK property ownership.

Plan ahead

It is a good idea to get a mortgage agreement before deciding on a property as once a purchase is agreed the process can move very quickly. Many vendors will not accept an offer until a purchaser can demonstrate that finance is in place.

It pays to do your research regarding developments taking into consideration factors such as maintenance levels of apartment buildings and the surrounding area, service charges, accessibility, schools, and nearby future developments as these all have a bearing on future values and saleability.

If looking to buy off plan consider the developer’s track record for completing the build at the due date and their past projects being of the standard promised. You should also be aware that some banks will not lend on certain developments so check this out before you commit if you will require finance.

How much can I borrow?

For expats, the maximum loan to value for the first property purchased will be limited to 75% of the purchase price up to a valuation of AED 5 million. For a purchase price above this level the maximum loan to value will be 60%. For all second properties the maximum loan will be limited to 60% regardless of value.

For UAE nationals the maximum loan to value for a first property of 80% on a value of up of AED 5 million and then 75% for larger valuations. For second and subsequent purchases they will be limited to 65%.

For any category of property bought off-plan from developers, the maximum loan to value will be set at just 50%. You will have to pay the first 50% and the Bank will fund the balance according to the payment plan.

Banks will calculate affordability. Your repayments can be no more than 50% of your income per month, less any other liabilities including loans and credit cards.

You can help yourself by ensuring that you keep your credit card limits, not the outstanding balance, to a minimum, as lenders will calculate affordability based on your limits not your outstanding balance. If you have several credit cards then it is worth considering either reducing or cancelling some of these before applying for a mortgage.

The fees and charges

We estimate that the costs, over and above the deposit are usually around 7-8% of the purchase price. The bulk of this is the Dubai Land Department transfer fee which is 4% of the purchase price, plus their admin fee. The lender’s fee is usually 1%, the valuation can cost anything from AED 2,500 to 3,000, estate agent fees are usually 2% (but you can try to negotiate), the fee for the NOC, miscellaneous fees and the broker’s professional fee.

Note that you cannot take out a personal loan to fund a deposit if taking out a mortgage in the UAE as this is against UAE Central Bank rules.

 The process

The first step is to collect the relevant documents in order to gain a pre-approval from a lender. We have access to all the major banks in the UAE and will recommend the best deals to meet your mortgage needs. Pre-approval usually takes up to five working days for employees and up to twice that for the self-employed and business owners.

When you have found the property and negotiated the terms with the agent you will be required to put down a deposit of 10% of the purchase price. A Memorandum of Understanding (MOU) is issued which sets out the terms and details of the purchase. This is binding and the deposit will be lost if you pull out of the purchase. The deposit is held with the agent and not cashed unless clauses aren’t adhered to in the MOU.

The valuation is instructed when the MOU is signed and all relevant documents have been received by the bank. This is carried by an independent valuer who will confirm the market price and whether the property is suitable mortgage security.

Once an acceptable valuation has been received and all other requirements have been met the final mortgage offer is issued. We will accompany you to the bank to go through the terms and conditions and many banks will also require you to open a bank account with them at this stage.

The bank will ask for undated security cheques which are held by them until the loan is repaid and these are used in the event of missing any repayments.

If there is an existing mortgage on the property this must be cleared in full and the vendor will need to provide a liability letter from their bank. These can take up to 10 days so are usually requested before the final offer letter is issues to reduce delays. We will liaise with all parties to ensure that this can be paid in time.

Purchasers must also go to the developer’s office, along with the seller, the agent and often the bank, to obtain a formal NOC (letter of no objection) to confirm that all service & maintenance fees have been paid to date by the seller. This can also add a few days to the process depending on the developer.

Final transfer at Dubai Land Department

Whereas in many countries the lawyer would handle the completion of a sale, in Dubai all parties need to meet at the Land Department for the final exchange.

Once all the required paperwork is in place, and there are multiple requirements, an appointment has to  booked at the Land Department’s Transfer Centre.  You’ll need to pay the deposit and the agent at this time too.

This can be a complicated and stressful process and unlike most brokers we will accompany our clients to guide them at what can be a stressful time and ensure the process is as smooth as possible.

Why use a broker?

As experienced and qualified mortgage brokers, we have access to all of the banks and so are in a position to offer impartial advice on the best products and compare the lenders for you. We will also guide you through the whole property transaction and reduce the stress from you having to deal with the banks directly. From time to time we also have exclusive promotions that are not available to direct applicants.

When dealing with applications we carry out a full compliance check for all applications which means that the pre-approval will go through quicker, especially as we will work out the provisional affordability for you too.

It is not mandatory to use a lawyer when buying a property in Dubai but it is important that professional advice is taken before signing the MOU and we can help you understand the clauses and point out any potential problems.

Applicants are also required to go to the Land Department at the time of completing the purchase and we will go with you to assist with what can be a daunting process. This is by no means standard practice for brokers but our service really is from start to finish. Our experience counts as we have handled hundreds of handovers.

Other considerations

We can also arrange mortgages for properties in Abu Dhabi and Ras al Khaimah and the process is broadly similar.

Unlike in the past it is possible for people who run their own businesses, are self-employed, or are paid largely in commissions to obtain mortgages but can now be done where a track record can be demonstrated. For anyone who owns a business or has a significant shareholding, fully audited accounts must be provided.

If you have an existing mortgage you have the option to remortgage with another lender to reduce interest rates. Ask for details.

Any property that you own in the UAE will be subject to Sharia Law on death, even if jointly owned, so it is important that you take steps to ensure that a property is passed to a spouse and children if you do not wish Sharia law to apply. All non-Muslim expats have a choice of how to set up wills to protect family and I can advise on this.

More information in this article:   Wills & protecting your family

Although many UAE mortgages come with basic life cover as part of the deal, this will usually be on the life of just one applicant and is purely for the benefit of the lender. It is wise to take independent advice to ensure family members will receive the proceeds of policies and also the property.

If you would like advice on arranging a mortgage, simply want to find out about your options (for both the UK and the UAE), or have any queries about any aspect of personal financial planning, please contact me at keren@holbornassets.com

Related article: An expat’s guide to buying property in the UK