The real estate market in the UAE is booming, with a wide range of houses built on land in each emirate, including different types of apartments and villas.

Types of Mortgages

Fixed Rate Mortgages: offer a fixed rate of interest for a certain period of time, which allows the monthly repayments to remain fixed for a period of up to five years.

Short-term mortgages: a type of fixed-rate mortgage, although the borrower chooses a relatively short term, such as one to three years.

Long-term mortgages: Loans with terms approaching five years are usually considered long-term mortgages.

Variable Rate Mortgages: The interest rate varies depending on the interest rate offered by the Emirates Interbank Offered Rate (EIBOR) during the selected period.

Provisions related to interest rate ratios

Debt Burden Ratio (DBR):

Definition: is the ratio of the borrower's total monthly expenses to his/her total income.

Regulations: According to the Central Bank of the UAE, banks and financial institutions in the UAE have the right to set a“maximum DBR of 50% of gross salary and any fixed income from specified sources”at any time. If the loan repayment plan extends beyond the expected retirement age, the loan provider will need to ensure that the balance outstanding at that time continues to be repaid at a DBR of 50% of the borrower's post-retirement income. If the mortgaged property is used for investment purposes, the loan provider will assess the borrower's ability to repay the loan by deducting at least two months of rental income from the DBR calculation, taking into account the off-lease period.

Loan-to-Value Ratio (LVR):

DEFINITION: Measures the ratio of loan-to-value to property value.

Specific Rules:

First Home/Owner Occupier Category: only one property per borrower. For properties valued at less than Dh5 million, the borrower can receive up to 80% of the value of the property; for properties valued at more than Dh5 million, the borrower can receive up to 70% of the value of the property.

Second and subsequent homes or investment properties: borrowers can obtain a mortgage on 60% of the property, regardless of the value of the property.

Phase 1 property: the maximum loan-to-value ratio for mortgages on purchased properties is 50%, regardless of the purpose of the purchase, the value or the category of the purchaser, in view of the long-term nature of the development process and the higher risk of completion.

Eligibility Requirements

Age Limit: Applicants must be at least 21 years of age. In 2019, the Central Bank of the UAE relaxed some of the requirements for applying for mortgages by removing the previously stipulated maximum age limit requirement of 70 years of age at the time of the last mortgage repayment, and lenders are now able to determine the maximum age limit based on their own risk management and policies.

Salary requirements: Most banks require a minimum salary of Dh15,000.

Type of Employment: Both salaried and self-employed individuals can apply for a mortgage.

Documents required to apply for a mortgage

Salaried person:

- Passport copy.

- Copy of UAE ID card.

- Salary certificate.

- Bank statements, usually for a period of six months.

- Pay slips for a certain period of time.

Self-employed:

- Copy of passport.

- Copy of UAE ID card.

- Copy of Business License.

- Bank statement.

- Articles of Association.

- Audited company financials for a certain period of time.

Co-Borrower Documents:

- Copy of co-borrower's passport;.

- Copy of UAE identity card.

- In certain specific cases and where applicable, the co-borrower may be required to provide proof of his/her income, income documents, payslips, bank statements, Memorandum of Association (MOA) and business license.

Other Important Matters

Loan Tenure: The maximum tenure of a mortgage loan is 25 years.

Debt Burden Ratio (DBR) limit: DBR cannot exceed 50%.

Maximum Financing Limit: The maximum amount of financing an expatriate is allowed to obtain is seven years of his/her annual income.

Repayment Requirements: Repayment must be made from salary or verifiable business or rental income, and borrowers are not allowed to utilize the Termination of Service Benefit; repayment must be made no less frequently than quarterly.

Repayment Methods: With the exception of mortgages with principal repayment installments, all other loans should be repaid with principal and interest on a declining basis; mortgages with deferred principal repayment are only applicable to investment loans, which are not allowed to fail to repay principal for more than five years from the date of the first drawdown of the loan.