Financing A Property In Dubai
Suppose you have a dream to buy your home in Dubai, but your capital doesn’t allow you.
Or you may be the one who is driven by a big idea. You are sure that it will work in Dubai, but a short budget is your problem.
Don’t worry; property finance is the best option here to help you. Property finance is the way to buy a property through a bank loan. You can convert your dream into reality with this type of property finance.
In case it’s your first time financing a property in Dubai. You just need to grip on several things to make it successful.
Step 1: A Clear Purpose Of Buying A Property
It’s the starting point of your property finance in Dubai. You need to have a clear idea for which purpose or reason you want to buy a property. Several investors have different buying purposes like
- Commercial purpose
- Residential need
- Some buy property for investment
This point is important to evaluate here. Suppose you want to buy a property for residential purposes and have a family. It’s better to buy one near schools and markets. It will be helpful in the future.
Suppose you want to buy land for investment. Buying high rental homes and buildings will be the best option. In case you are an employer and want your own space. Find an apartment near the job place. Evaluation of this question will narrow down your sight to a specific location. From which you can easily proceed further.
Step 2: Price Estimation
After you specify the area where you want to buy a property, the next step is to estimate the property price. However, Dubai is best for its less expensive properties. Still, it’s important to get an idea of the price for the property you want to purchase.
For that instance, you can ask the property agent. Another way is to ask the price of nearby properties. It will help you estimate the exact price of your desired property.
Step 3: Research on Legal Information
When everything is done related to the price and locality of the property, the further step is to have good research on all the legal processes for property purchase. If you are not eligible to purchase, a bank loan can help you with financing. You must fulfill some criteria for the financing process, especially if you are a foreigner.
Step 4: Search for The Best Property Finance Bank in Dubai
Here the question comes which bank in Dubai you want property finance from. For this purpose, either you take help from a broker or compare different bank sites.
● Websites Comparison
Comparing the bank sites yourself can give you a better idea of which one is best for property finance. For this purpose, you can search the famous bank sites in Dubai and evaluate their sites thoroughly for exact estimation.
When you consider different bank options for financing, it’s important to choose the one with easy terms for foreigners. Most finance banks in Dubai don’t allow property finance for foreigners. Or they put a condition of registration from the central bank. However, some finance banks are not that strict about central bank registration.
● Broker Advises
Finance brokers are the best options as you don’t need to do anything by yourself. The reason is that they have an exact idea of the market rates. Also, they know the best banks in the marketplace for financing.
Step 5: Choosing the Right Type of Property Finance
Choosing the right type of property finance is important. There are several loan types depending on their rates and variable options. Some of the types are
- Commercial finance
- Auction mortgage
- Development finance
Different factors will decide the perfect type of property loan for you. The banks have online property loan calculators to help you choose the required variables. These variables will give you a good idea of the monthly installment.
Step 6: Agreement on Pre-approval Principal
Going through this finance process, agreement on principles beforehand will help you. The agreement is important with the bank for finance. Afterward, you can proceed further with the complete application for the loan.
The agreement involves advance approval on loan before further proceeding. This step also saves you from unwanted mess.
It also outlines the loan criteria the bank will provide you. It’s better to find a property after a pre-approval letter from the bank. But there is nothing wrong if you have done this before.
Step 7: Criteria of Eligibility for Property Finance in Dubai
The eligibility criteria depend upon several factors, such as
- Age; The age of the buyer must be over 21.
- Life insurance; The buyer must be eligible for life insurance. The insurance cost must be around 3% of the amount you took for a loan.
- The buyer must pay the amount of the loan within 25 years. Most companies do not exceed the year criteria.
- Banks ensure that the loan amount will not exceed over 90% of the property price.
Step 8: Required Documents
The documentation requirement varies from bank to bank. The following papers are required for loan approval:
- Passport photocopy
- Residential visa
Ensure that you have a residential permit visa if you need to buy the property in Dubai. You will get a resident visa if the property you buy in Dubai costs over 2 lacs 70 thousand.
- The bank history for your last six months will be important.
- If you are doing some sort of job, in this case, you need to provide your salary certification, most importantly.
- If you are doing a business, you need to provide a complete profile of your business and its financial records and trade license copy.
The bank will take around 90 days after getting your papers for application approval. After approval, the seller will transfer the property to the buyer in the presence of both buyer and seller of the property. All of this legal process takes place in a notary office.
It’s important to note that the United Arab Emirates land department must register the transfer of the property. The bank you consult for property finance will take 1% of the property cost. This cost varies with the bank.
Step 9: Finalizes Loan Agreement
When you get the pre-approval letter and property search, you need to ask your bank to provide the loan. The bank will take help from the property agent to get the exact estimation of the property.
Upon the evaluated estimation, now the bank will offer you a good deal. Here, the buyer and seller need to agree on one price. Once it’s done, you can pay some deposit to the seller in advance and decide the day for completing the transaction.
On this decision, you must consult the bank first. On the decided day, the bank will give the amount to the seller. This process will make you the owner of the house in Dubai.
Insurance is important for property finance. There is a couple of rules:
- The amount for the loan you take for the property will decide which insurance policy you will get for your property.
- A rough estimation is choosing an insurance policy for which you can pay the yearly premium of around .1% of the property cost. This type of property insurance helps the buyer because of its affordability.
How Does Property Finance Work In Dubai?
The financing of property in Dubai mostly takes place under all the Islamic laws, making it halal.
However, some companies make some key changes to those laws.
- One way to change is that one party or person purchased a handsome amount of goods from a second party. Afterward, they resell it at a profitable amount. But it doesn’t cross the Islamic laws of financing. This form of business comes from Murabaha.
- The other way is the bank will purchase the property and rent it to the buyer. It doesn’t include any kind of interest. Because of this, it is highly eligible for buyers who can’t afford to buy the property at all.
Why Is It Important To Apply For Property Finance Before The Property Search?
Getting bank approval for property finance first is important. The pre-approval letter determines the amount of loan you want for your desired property. If you search the property first and ask the bank for property finance, you will not secure the full amount of finance required to buy the property.
Investing in property in Dubai can be a good idea because it’s a tourism and traveling spot. Having your property in Dubai can serve you multiple purposes, as it is ideal for high rental rates. Choosing the right finance broker and valuable property will help you get the maximum benefits. Especially for non-citizens, the above-discussed steps will ease your way through the process of property finance.