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Financing Dubai Investment Properties

31st May 23 - 6 MIN READ

Dubai Investment Properties: Where Can Expats And Foreign Investors Buy?

There is no restriction on ownership of Dubai properties per se - non-residents or ex-pats can own different types of real estate in Dubai, including apartments and villas. There are, however, restrictions on where non-residents can make a Dubai property investment. Foreign investors and ex-pat buyers can purchase property in Downtown Dubai, Palm Jumeirah, the Marina, Arabian Ranches and Jumeirah Beach Residence, for example. Outside of the designated ‘freehold’ areas where non-citizens and ex-pats can purchase property (which extend beyond those listed here), it is not possible to purchase Dubai investment properties - in the popular Mirdif zone, for example, it’s not possible for foreigners to own property in all the communities. It’s worth noting, however, that most of the areas where ex-pats and non-residents can make a Dubai property investment tend to be sought-after zones (often where supply outstrips demand) and where there are good rental yields and steadily appreciating property prices. 

 

Financing Dubai Property Investments: Overview

Dubai property investments need to be planned carefully when it comes to mortgages - accessing finance is often the most complex part of a purchase process, especially if you’re a non-resident or ex-pat. While more and more lenders cater to anyone looking to invest in Dubai property (including ex-pats and non-residents), accessing a Dubai mortgage can still be challenging as lenders typically take a more cautious approach to risk. In many cases, if you are approaching lenders yourself, they will offer packaged Dubai mortgage products with a low loan-to-value ratio, less competitive rates, higher fees and more restrictive terms. Enness will be able to negotiate a deal for you and maximise what you can borrow while keeping your overhead costs as low as possible.

A mortgage for Dubai investment properties can also take significant time if you are arranging this yourself as lenders will review mortgage applications and supporting documentation extremely carefully. It’s usual that they often ask for additional documents, paperwork and evidence to support  their lending decision. Enness are expert brokers for Dubai real estate investments, and we can help you access the most competitive mortgages on the market. We will also help you complete the completing transactions quickly and efficiently, whether you are based abroad or you are an expat residing permanently in the Emirate.

 

Mortgages For Dubai Investment Property: What To Know

Enness is a leading Dubai mortgage broker. We specialise in assisting expats and non-residents access the most competitive mortgages to invest in Dubai property. We regularly assist buyers who have complex financing requirements, unusual financial backgrounds  that makes accessing a mortgage a challenge, or borrowers who are looking to access a large mortgage for a villa, trophy property or holiday home, as well as buy-to-let investments.

 

Loan Amount And Loan-To-Value Ratio

While lenders are increasingly eager to offer mortgages to expats and non-residents looking to make a Dubai property investment, maximising the amount you can borrow against the value of the property (known at the loan-to-value ratio, or LTV) can be challenging if you are approaching lenders directly or if you aren’t working with an expert like Enness that can give you specialised advice, negotiate with lenders and help you from Dubai. 

There are regulations with regards to the maximum LTV that non-residents can borrow for a Dubai real estate investment, which dictate that foreign investors need to put a minimum of 20% deposit down for a property purchase. However, many lenders will initially offer non-residents much lower LTV: sometimes requiring a deposit of as much as 40-50%. Working with a broker like Enness will usually see you able to access a higher LTV, maximising the amount you can borrow to facilitate the purchase of your Dubai property investment.

 

Interest Rates

For anyone looking to invest in Dubai real estate and finance the purchase with a mortgage, interest rates are a key consideration. Fixed and variable-rate mortgages are common in Dubai and both come with specific advantages which make them ideal in certain scenarios or for borrowers with certain profiles. There’s no ‘better’ option: the mortgage product you take will depend on your plans for your Dubai real estate investments, your financial goals and background. Enness will explain all your options carefully and can run cost simulations for you, so you can make an informed decision on what the best option is for you. As well as fixed and variable rates, some lenders offer alternative products and rates, although your eligibility may depend on your profile, background and the amount you are borrowing. 

Variable rate mortgages in Dubai are usually based on the 3-month EIBOR rate (Emirates Interbank Offered Rate), plus a fixed margin which is added to the EIBOR rate that the lender will set for the duration of the mortgage. As (or if) the EIBOR rises and falls, what you’ll pay for your mortgage will change. Variable rate mortgages can be ideal for borrowers who have plenty of surplus income and you need less certainty over how much you will pay for your mortgage. 

Fixed-rate mortgages are also common in Dubai, and they are popular with expats and Dubai investment property owners. Fixed rates give certainty of what you’ll need to pay each month, but because you’ll lock in your rate for a year or more, if the base EIBOR rate drops, you might find there are cheaper rates available before the end of your term. It’s worth noting that in Dubai, fixed rates of 1-5 years are key. In countries like the UK, 10-year fixed rates are relatively common, but in Dubai the terms are shorter as standard.

Early repayment fees, and, usually, an arrangement fee may be due when you take out a mortgage and will increase your costs if they’re applicable, even though they’re not directly related to what you’ll pay in interest. You will also need to pay a mortgage registration fee (payable to the Land Department). 

 

Mortgage Length

Financing a Dubai real estate investment with a mortgage will see banks offer loans of around 35 years at maximum - although lenders will want to reduce the term for expats whose 25-year mortgage would endure past a 65th birthday. This can smetimes be negotiated if you are a successful entrepreneur, business owner or you make significant income through self-employment or if you are a very wealthy borrower. We can negotiate Dubai property investment mortgages for individuals approaching the end of their professional career if you can document plans to exit through a significant liquidity event (i.e. sale of another property, sale of a business) and so on. This will usually count as an unusual scenario, and lenders will be more receptive to negotiating the loan with a broker than with the borrower directly, given a broker like Enness will have ensured that the proposed plan is viable and your financial situation supports such a loan.

Foreigners making a Dubai property investment will usually be able to opt for the maximum loan term (around 25 years, depending on the lender) or a shorter mortgage term, depending on what is most convenient and fits best with your plans for the property.