What does the UAE’s new mortgage rule mean for buyers?

UAE Central Bank’s latest announcement of the mortgage rule, restricting home loans to nationals to 80% of the property value and those to expats to 75%, is yet another regulatory move that we’ve seen this year. The loan cap also comes closely on the heels of a doubling of property registration fees from 2% to 4% in a clear move to discourage flipping, relax price increases and prevent a re-run of the 2008 crisis.

Gains in property values and rents so far have been built on solid fundamentals such as trade and tourism and have impacted both prime and emerging neighbourhoods – making the market’s current behaviour different to that in 2008 and a great time to invest in property.

So, for those of you looking to buy a property in the UAE, keep these pointers in mind while you hunt for a mortgage for your dream home.

Get your finances in order

You will not be able to take a personal loan or use your credit cards to meet property down payments anymore, so ensure that you have set aside money for this purpose to avoid being financially strapped. Also, avoid making any major purchases such as a new car before applying for your mortgage and until you’ve signed on the dotted line so that you come across as a risk-free customer to the banks.

Know the loan amount you are eligible for

Whilst opting for a home loan, understanding the terms of your mortgage is very important. As per the latest rule, UAE nationals looking to purchase their first home will be eligible for a maximum 80% of the property’s value. However, if the value of the property is more than AED 5 million, then a loan of up to 70% of the property’s value will be available. 

On the other hand, non-UAE nationals and expats buying their first homes in the country can avail home loans for up to 75% of the property’s value, if the sale price is less than AED 5 million. 

However, if the price is above AED 5 million, then a mortgage for a maximum 65% of the value of the property can be availed. However, second home buyers will only be able to take a loan for 60% of the value of the property, regardless of price.

The maximum loan tenure is now 25 years 

The new mortgage rule also states that the maximum age of the borrower at the time of payment of the last installment should be 70 years for UAE citizens and 65 years for non-citizens (or 70 years if the borrower works for the benefit of himself). Ask yourself how long you’d like to live with a home loan and evaluate your chances of prepaying the mortgage as your income goes up.

So, before you sign in for a mortgage and close in on the house of your dreams, keep these facts in mind so that you stay aware of all the bumps and bruises that you might encounter along the way.