If you have finally decided to buy a property, the immediate step is to jump into what may sound like a complicated procedure to many buyers. However, you need not worry to much as the Dubai Land Department (DLD) makes sure that the process is fast and smooth. Any person of any nationality, can purchase in Dubai's freehold property market in designated areas. An average property transaction in Dubai takes almost 30 days to complete from the date on which the Agreement for Sale is signed.
Here is a quick guide to buying a property in Dubai that includes two major processes of buying a property and applying for a mortgage.
The Process Explained
From seeing a property to getting the title deed transferred to your name involves a few steps in between. The process is simple if you do your homework in advance and are aware of the simple steps involved in buying a property in the UAE.
• Look for a property through RERA-registered brokers
• Once you have chosen a property, offer the seller a price
• Once the seller and buyer agree upon a price, the seller’s broker gets the Memorandum of Understanding (MoU) ready stating all costs and responsibility of both parties.
• The buyer needs to deposit a 10 per cent deposit cheque in the name of the seller to the agent to secure the property. In case any of the parties breaks the contract, a penalty of 10 per cent of the property value will be levied on the party who breaches the contract.
• If a buyer is paying with a mortgage, the buyer’s bank will carry out a valuation and inspect the property to ensure that it is secure enough. Most banks charge Dhs 2,500 plus VAT to carry out the procedure. (The mortgage process is explained later in this article)
• Once the bank’s valuation aligns with the property value, the bank will start processing the loan, that takes approximately two to three weeks. Bank fees vary between 0.5 and 1 percent of the total loan value.
• Once the bank gives a nod to the buyer, simultaneously, the seller needs to obtain a No Objection Certificate (NOC) from the developer.
• The appointment needs to be then booked at the Dubai Land Department to complete the transfer.
• On the date of the appointment, the buyer, seller and the bank’s representative appear at the DLD office to complete the transaction.
• When all the processes have been registered, the buyer and the bank hand over their respective cheques to the seller and pay the fees to all the parties involved.
Keep a note as the Central Bank of the UAE policy is the bank can finance up to 75 per cent of the value of the property for expatriates and 80 percent for local citizens. In addition to the deposit of 20% or 25% of the property value, the buyer needs to pay up to an extra 7% in costs at the time of purchase. The 7% is made up of 4% DLD fees and 2% real estate brokerage fees. The additional 1% would be for the bank arrangement fee (between 0.5% and 1% of the mortgage amount), valuation fees, mortgage registration fees, insurance fees, land registry fee.
• Once the documents are approved and payments are made, the buyer receives the title deed in their name, the house keys and access cards.
The Mortgage Approval Process
If you are fundig your property purchase with a mortgage, we have laid out these simple steps involved in the application process. The process includes submitting important documents, obtaining pre-approvals and bearing a few costs. Another important thing to learn about is what is the duration of the loan and how much of the loan you can get approved from a UAE bank, these two things are directly linked with your age and salary as explained further.
The type of interest rate, fixed and variable interest rates, also play a crucial role in the mortgage process.
A better understanding of the process, different banks offer and Central Bank guidelines. make things quick and efficient once you finalise a property.
• The applicant should have a brief conversation with an advisor to determine their affordability.
• Submit their passport, visa and Emirates ID along with their proof of income documents.
• Review with a mortgage advisor
• Submit the loan application form fully filled in after discussing the lender options.
• A 2 to 4 day wait at this stage is estimated for approval.
• Submit the property documents for the valuation to be instructed.
• A valuation report will be expected after 2 to 3 days and then the final offer needs to be produced by the bank.
• Make sure all conditions are met and prepare for disbursal.
• If there is finance on the seller’s side that needs to be cleared, then you will need to request the seller’s bank liability letter, if not then request a NOC.
• After the NOC has been produced, you will need to schedule an appointment with the lenders representative and the relevant parties.
• If there is finance from the seller’s side, once the liability letter arrives the settlement will be requested from the buyer’s bank.
• At this stage all money should be lodged with the buyer’s bank.
• Settlement normally takes around 10 to 14 days to receive the clearance documents and then move to NOC
A Few More Things To Know Before You Apply For Mortgage
Age And Loan Duration. The maximum duration of the finance depends upon the age of the applicant on its maturity date. For self-employed, the maximum age at the maturity of loan is 70, and for salaried expatriates, the age is 65. You can apply for a mortgage for a minimum of one year or a maximum of twenty five years, as long as the applicant’s age does not exceed the limit at the time of maturity.
Salary. The amount of the mortgage approved will depend on your monthly fixed salary. It is considered that 50% of your salary will be used towards your basic necessities including the mortgage repayment and other monthly payments therefore all borrowings must fit within the 50% of your fixed salary. This criteria makes sure that the applicant is financially sound to meet the monthly instalments.
Different Types of Mortgages
Repayment Mortgages. The monthly instalments include a part of the capital amount borrowed and accrued interest.
Interest Only Mortgages. The monthly payment covers only the interest charges on your loan, not any of the original capital borrowed. This means your payments will be less than on a repayment mortgage, but at the end of the term, you will still owe the original amount you borrowed from the lender.
According to the experts there are predominantly repayment mortgages available. There are some very limited options for interest only, however generally these are not attractive.
In brief, the whole process of buying a property in the UAE is quite convenient and simple as long as you do your research.