High LTV for First Time Property Buyers in Dubai

Posted by Allegoria Properties on July 7th, 2017

The mortgage cap introduction in 2013 has toughened the property buying process. It requires the buyers to put up more deposits against the purchase. This has impacted the first time buyers but the expected impact was minimal or nil for the affluent or individuals with high net worth.

The maximum loan to value in UAE is 75% for the expatriates, thus providing it is the first mortgage and the property is worth Dh 5 million. For higher purchases than this amount, the LTV lowers to 65%. First-time buyers have to find 25% down payment with an estimated percent of the property value for covering the fees for transactions which are a tough amount to swallow for many buyers.

Here’s what you can do:-

Put down existing property

It’s a good way to make your assets work harder for you to own a property locally or internationally with fewer mortgages. This way it will release the cash to fund the down payment. Ensure with the mortgage consultant before going this way because some UAE banks and lenders will not accept equity released funds. The banks interpret UAE mortgage regulations differently to others.

Cash or Investments

High net worth individuals use private banking to finance the property. Many expatriates maintain wealth offshore. Interest rates remain low and are beneficial to borrow against a portfolio of stocks and shares as they offer to outperform against the cost of borrowing. 

Avoid Personal Loans

Banks and the borrowers both don’t indulge in personal loans to be used as a down payment. It is very different to borrowing against a property. They are insecure debt and if used for a loan, there is no security or stakes which will make sure that the loan gets repaid. In UAE, personal loans have a maximum duration of 48 months, so the monthly payments are higher for short period than borrowing the same amount over a 25-year mortgage.

For Other Fees, Personal Loan is Fine

These can be used to pay approximate 7% transaction or purchase cost. There are following types of cost to buying a property in Dubai- real estate broker fee (2%), DLD transfer fee (4%), 0.25% mortgage registration & registration & trustee office bank fees.

There are other ways to get the extra money to be able to finance the purchases but only invest in & purchase a property which is affordable.