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A guide to understanding home finance in the UAE

With a wide range of homes to choose from and low financing rates available, buying a property in the UAE has never been more attractive. Our quick guide explains all you need to know about home finance in the UAE

With low finance rates and some exceptional bargains available on the market, 2021 presents a stellar opportunity to get on the property ladder by buying your own home in the UAE. However, before you ask for home finance in the UAE, it’s advisable to assess your own situation and to survey the market.

Doing so can help you make an informed decision.

This article offers a primer on home finance in the UAE.

Who needs home finance in the UAE?

Purchasing a home is probably one of the most important financial and emotional decisions you can make in your lifetime. While paying with cash is an option available to close a deal at a great price, the associated costs of purchasing a home can be quite high, tying in lifetime savings that could otherwise be available for other major expenses in the future. Consequently, most residents look for financial assistance when buying a home in the UAE.

What types of home finance are available in the UAE?

With a home finance market expected to exceed AED20 billion by the end of 2021, the UAE is home to a wide range of home finance providers. From the biggest brands in the Middle East to known international players, residents can choose from a wide variety of home finance products.

Consumers tend to prefer Islamic lenders overall, most notably for reasons of transparency and trust. Broadly, the difference between Islamic and conventional home finance breaks down as follows - with conventional mortgages, consumers fund their purchase with a bank loan. They pay interest on the amount and may be asked to pay extra interest in case of a default.

On the other hand, with Islamic home finance, the bank purchases the property (the asset) and leases it to the customer with a promise to sell under an Ijara structure. Under the lease agreement, the customer pays back monthly rental payments (instalments). The ownership of the property is transferred back to the customer at the end of the finance term after all rental payments have been duly paid. This amount is paid in monthly instalments, and can be considered a sort of rent. Any additional fees are indicated in advance to the customer.

Who can take out home finance in the UAE?

Emirati nationals, Expatriates and Non-Residents are all eligible for home finance in the UAE provided they can show relevant proof of income. However, the conditions may differ. For properties under AED5 million, Emirati nationals buying property for owner occupancy purposes must pay 15% of the total value as a down payment. For expatriates, this figure is 20% of the property’s value. Different rates apply over AED5 million and to those buying their second or third properties.

Foreigners who do not live in the UAE may also take out home finance in the UAE depending on where they live and whether they can provide the documents required.

How can I determine my home finance eligibility?

In general, home finance in the UAE is available to Emirati Nationals who earn a minimum of AED10,000 and AED15,000 for Expatriates. However, rates and finance amounts vary across the different providers, so check out an online calculator to determine your eligibility for home in the UAE.