By a senior broker at Cielo Properties
Let’s walk through how a mortgage works in Dubai, including the costs that can catch buyers off guard.
A mortgage is a loan secured against a property. You pay part of the purchase price yourself, and the bank lends you an agreed amount towards the balance. With a conventional repayment mortgage, your monthly payment covers interest and part of the money you borrowed, known as the principal. The property belongs to you, with the lender’s mortgage registered against it. If you don’t keep up repayments, you could lose the property.
As you repay the principal, the amount you owe falls. Your equity is the property’s value minus the outstanding debt. It can grow through repayments, but it also changes with the property’s value. We shouldn’t build a buying decision around an assumption that prices will always rise.
Now, how much will the bank lend? For an expatriate buying a first home to live in, valued at AED 5 million or less, the UAE Central Bank permits financing of up to 80% of the property’s value. For UAE nationals in the same category, the maximum is 85%. These are regulatory ceilings. Your bank can approve less, and other purchase categories have different limits.
Here’s what that could look like for an eligible expatriate buying a completed AED 2 million home, assuming the bank accepts that value and approves an 80% mortgage.
| Item | Illustrative amount |
| Purchase price | AED 2,000,000 |
| Mortgage at 80% | AED 1,600,000 |
| Your 20% deposit | AED 400,000 |
| Full 4% DLD sale registration fee | AED 80,000 |
| Mortgage registration at 0.25% of the loan | AED 4,000 |
| Deposit plus these two fees | AED 484,000 |
The table assumes your purchase contract makes you responsible for the full 4% sale registration fee. DLD’s published schedule allocates 2% to the seller and 2% to the buyer, so check the agreed allocation. Mortgage registration is a separate 0.25% of the mortgage value.
And AED 484,000 still isn’t your complete buying budget. You’ll need to account for applicable trustee and administrative charges, bank processing and valuation fees, brokerage fees, and insurance costs. Ask for a written breakdown for your transaction before you commit. It’s much easier to make decisions when those costs are on the page.
The monthly payment deserves just as much attention. Under the Central Bank’s mortgage rules, the debt burden ratio generally can’t exceed 50% of gross salary and qualifying regular income. That calculation includes your other debt commitments. The maximum mortgage term is 25 years, although the bank may offer you a shorter one.
But a bank’s limit is only one part of your budget. School fees, groceries, building service charges, and the money you send home still need room. I’d work backwards from a monthly payment you can live with, while keeping savings for unexpected bills.
Then look beyond the advertised interest rate. A fixed rate stays unchanged for the agreed period. That might cover the first few years, rather than the whole mortgage. After that, the loan may switch to a variable rate linked to EIBOR plus the bank’s margin. Check the offer’s wording and when the rate resets.
EIBOR is the Emirates Interbank Offered Rate, a UAE benchmark for lending between banks. For a mortgage linked to it, changes in the benchmark can change your repayments.
To make the difference tangible, a hypothetical AED 1.6 million repayment mortgage over 25 years would cost about AED 8,893 a month at 4.5% annual interest. At 6%, it would be about AED 10,309. These are separate illustrations using the same starting loan and term, excluding fees and insurance. They aren’t current bank offers or a prediction of your payment after a rate reset.
That’s why I’d ask the lender to show you a higher-rate scenario alongside the initial payment. You’ll have a much clearer sense of whether the mortgage gives you enough breathing room.
Before getting attached to a particular home, seek mortgage pre-approval. It gives you an indication of what a lender may offer, although it doesn’t guarantee final lending. For a resident applicant, the paperwork commonly includes a passport, visa, Emirates ID, salary certificate, bank statements and details of existing debts. If you’re self-employed or buying from overseas, request a checklist for your circumstances.
The bank will also assess the property. Its valuation is an independent assessment of market value. Because lending limits relate to the property’s assessed value, a lower valuation can mean you need more cash to complete the purchase. Ask how the lender will calculate the loan before you sign an agreement that depends on financing.
And if you’re buying off-plan, we need to have a slightly different conversation.
A developer’s payment plan sets out when you pay the developer. A mortgage is a separate lending agreement with a bank. Agreeing to the first doesn’t secure the second.
The Central Bank caps the loan-to-value ratio for mortgages on properties purchased off-plan at 50%, regardless of the buyer category, property value, or purpose. That’s a maximum permitted level, rather than a promise that a bank will finance your chosen project.
Financing the final payment once a property is completed can be another route, depending on the lender and its approval requirements. HSBC, for example, describes financing the last developer payment upon completion. You’ll still need the relevant approval; today’s income and lending conditions don’t guarantee what will be available at handover.
At Cielo Properties, we want you to look at the full payment schedule before choosing an off-plan home. If a large balance falls due at handover, work out how you’ll cover it and what you’ll do if the mortgage is smaller than you expected. A manageable booking payment can sit at the start of a much bigger commitment.
One more question to ask before accepting a mortgage offer: what happens if you want to repay early? The Central Bank caps home-loan early settlement fees at 1% of the outstanding balance or AED 10,000, whichever is lower, before applicable VAT. Also check the lender’s allowance for extra repayments without charges.