Things to Consider Before Applying for a Mortgage as a UAE National

Being a UAE national comes with a few perks. For example, the down payment percentages UAE Nationals have to pay to their mortgage lenders when they purchase a home is significantly lower than that of expat residents, just 20 percent. But, that doesn’t mean houses in the UAE come cheap.

Here are a few expenses to consider when planning your home budget. Knowing about these extra costs will help you plan a realistic budget for your pre-approval confirmation appointment.

Get Pre-approval Before Shopping

Most home buyers think they should start shopping for a home before getting pre-approval. This is a mistake. This pre-approval confirms your budget and your ability to engage in negotiations with sellers. When you sign a sales agreement with a seller, you’re required to produce a check for 10 percent of the purchase price of the home.

Let's say you commit to this and sign, and the purchase price is 400,000 AED. If you try to get pre-approval after signing and are denied, you will lose the deposit you gave to the seller. That’s 40,000 AED. This is why you should always get your pre-approval before committing to home shopping; you don’t want to lose valuable money.

It would be a good idea to include a property valuation clause in the sales agreement. This stipulates that the home sale is subject to a property valuation by the bank. In the event the lender refuses to grant the mortgage, on the basis that the property is overvalued, the buyer’s 10 percent deposit is protected.

Expenses VS Income

Banks usually only allow mortgage repayment periods up to 25 years. Because of this, they are extra strict in ensuring a buyer’s expenses are not overpowering their income value. When planning your budget, consider that a bank will not allow mortgages to buyers whose repayment figures are more than 25 percent of their monthly income.

In this budget, banks factor in your existing debts. This includes car loans, personal loans, business loans. It also incorporates credit card debt. Make sure you settle your debts before applying for a mortgage.

Can You Afford the Extra Fees?

Buying a home isn’t just about your mortgage repayment. There are other fees incurred that aren't part of the mortgage. Buyers will have to pay for commission fees, land department fees, and more. These fees can be expensive.

Using a small number, let’s say you’re purchasing a home for 100,000 AED. Your loan amount will be for 80,000 AED. You’ll be paying 20,000 AED as your deposit.

Now, you’ll also have to pay 4,540 AED as a land department fee, a 2,000 AED registration fee, a 3,150 AED valuation fee, a 2,100 AED estate agency fee, and a 210 AED registration fee. This adds up to an extra 12,000 AED in additional fees not covered by the mortgage.

As a buyer, you need to make sure you can afford these extra costs as well.