Busting myths: What are some common mortgage myths in Dubai?

Thinking about getting your first mortgage in Dubai?

You might be all cloudy, wondering just how to go about it with the many myths and questions that come up from that Google search about “mortgage myths in Dubai”.

We’re here to bust them and put your mind at ease.

Myth 1 - Only UAE nationals can get a mortgage

Busted: One of the most common myths is that only UAE nationals can secure a mortgage in Dubai.

In reality, both expats and UAE nationals are eligible for mortgages, especially seeing how popular the foreign real estate investment is in Dubai, it comes as no surprise that expats are eligible for a mortgage.

Banks in Dubai offer various mortgage products tailored to meet the needs of different customer profiles, including mortgages for non-residents. However, when it comes to the terms and conditions such as down payment requirements and interest rates - it can vary between nationals and expatriates.

Myth 2 - A 20% down payment is always required

Busted: While the UAE Central Bank has set a minimum down payment of 20% for expatriates and 15% for UAE nationals for properties worth less than AED 5 million, there are exceptions and flexible payment options.

If you are opting for an off-plan investment, many developers offer incentives like reduced down payments or even payment plans such as 80/20, 60/40 or even 90/10. These can extend post-handover making it easier for buyers to manage their finances.

Myth 3 - Mortgages are only for ready properties

Busted: Another common misconception is that mortgages are only available for completed properties.

In fact, many banks in Dubai provide mortgage options for off-plan properties as well. However, the terms for off-plan property mortgages might differ, with some banks requiring a higher down payment or offering shorter tenure loans. Additionally, many off-plan developers offer their own payment plans as well.

Myth 4 - Fixed rates are better than variable rates

Busted: The debate about choosing between fixed and variable rates is ongoing, but it ultimately depends on the person’s individual financial situation and the market conditions.

Fixed-rate mortgages usually offer stability with consistent monthly payments, which can be beneficial during periods of fluctuating interest rates.

On the other hand, variable-rate mortgages might offer lower initial rates, but the payments can vary over time. It’s important for you to assess your financial situation and risk tolerance before deciding.

Myth 5 - Pre-approval guarantees a mortgage

Busted: While a mortgage pre-approval is a crucial step in the home-buying process, it doesn’t guarantee that you will receive the mortgage.

Pre-approval is based on a preliminary assessment of your financial status. The final approval involves a more comprehensive review of your finances, the property, and other factors. It’s essential to maintain your finances and avoid significant changes during the approval process.

Myth 6 - You can’t pay off your mortgage early

Busted: Many believe that once you take out a mortgage, you are locked into a long-term repayment plan without the option of early repayment.

However, most banks in Dubai do allow early repayment, and though it might come with certain fees or penalties, it is allowed. It is important to understand the terms of your mortgage agreement to avoid unexpected costs if you plan to pay off your mortgage ahead of schedule.

Myth 7 - All mortgage brokers offer the same deals

Busted: Not all mortgage brokers offer the same deals.

Different brokers have different relationships with various banks and can negotiate different terms and rates. It’s important for you as the buyer to find a good mortgage broker as they would be able to speak to every bank and negotiate the best offer based on your financial needs.

These are just the top myths!

If you are curious about the other mortgage myths in the market - you can watch our podcast - Taking Care of Business, with CEO; Carl Allsopp and Mortgage Services Manager; Connor Humble - On busting Dubai’s most popular mortgage myths!