An Introductory Guide to Financing and Mortgage in Dubai

General Guides
September 17, 2023

At Stat Global, we have created a series of articles that introduce us to the marvelous world of Real Estate in Dubai, from the different areas, the process of buying residential and commercial property to how to measure the success of those investments. 

For today's article, we will cover financing and mortgages in Dubai, the prominent financing institutions available, any particular laws, and the status of these procedures for foreigners. 

What do Financing and Mortgages Mean in the Context of Real Estate?

Financing and mortgages play crucial roles in the real estate industry. 

  • Financing refers to the various methods and sources to get funds to purchase or invest in real estate properties. It involves securing loans or capital to cover the costs of buying, developing, or renovating properties. 
  • Mortgages, on the other hand, are specific types of loans used to finance real estate purchases, where the property itself serves as collateral for the loan. Borrowers make regular payments, including both principal and interest, over a specified period until the loan is fully repaid. This allows individuals and businesses to acquire real estate assets without paying the total purchase price upfront, making real estate investments more accessible.

How does Mortgage Work in Dubai?

The mortgage system in Dubai operates like many other places. When someone wants to purchase a property, they can secure a mortgage from a bank or financial institution. The property serves as collateral for the loan. The borrower then makes regular payments, typically including the principal amount borrowed and the interest, over an agreed-upon period. 

Once the mortgage is paid, the property ownership is transferred entirely to the borrower. It's important to note that mortgage terms and regulations can vary, so it's advisable to understand the specific rules and requirements set by authorities in Dubai.

What are the Financing Resources One Can Have Access to in Dubai Regarding Real Estate Investments?

In Dubai, there are several financing resources for real estate investments. These include traditional bank mortgages, where borrowers can obtain loans to purchase properties. Additionally, various financial institutions and lenders offer specialized real estate financing products. Some developers also provide financing options directly for off-plan properties.

Additionally, Dubai has seen the rise of Islamic financing options, which comply with Sharia law principles. These options cater to those seeking investments that align with their religious beliefs. Overall, the real estate market in Dubai offers diverse financing avenues to suit different investor preferences and needs.

How Do Islamic Financing Options Work in Dubai?

We define an Islamic bank as an institution that adheres to Sharia Law, which prohibits charging interest on loans.

In conventional mortgage systems, borrowers typically pay only the interest portion of the loan amount in the first few years, with the principal amount being paid off later during the mortgage term. However, this practice is not allowed under Sharia law. Instead, Islamic economic models offer financing options to individuals who want to own property while adhering to their religious beliefs.

What are the mortgage models of an Islamic Bank?

Banking institutions have developed alternative models that align with the principle of not charging interest on loans, and instead use Murabaha Financing and Ijarah Financing.

Murabaha financing:

The bank purchases the property and resells it to the buyer with a markup. The buyer repays the bank in monthly installments. To protect against the possibility of a buyer not paying their mortgage, banks usually register the property under their name until all the mortgage payments are completed. In some cases, the buyer's name may also be added to the title deed by the banking institution.

Ijarah financing:

Ijarah is a type of Islamic financing that involves a buy-and-lease-back arrangement. It is a suitable option when buying an off-plan property, because no payments are required until the property is completed.

Under this model, once you make the down payment both you and the bank become co-owners of the property. Over time you gradually acquire a larger ownership percentage as you make rent payments. The amount of rent you pay decreases over the years until you eventually have 100% ownership of the property.

How Do Developer-Backed Financing Options Work in Dubai?

In Dubai, developers offer financing options to those interested in owning their property. Some of these options include rent-to-own property financing. One advantage of using developer financing is that bank mortgages come with fees and usually are more expensive. Buying directly from a developer comes with less fees. 

A disadvantage is that the time to pay off the property is shorter, usually within 5-7 years, compared to a traditional mortgage of 15+ years. Additionally, the price of the property is higher than the market rate at the current moment.

As a future property owner, it will be your responsibility to determine which mortgage solution best suits your needs. If you require assistance in assessing which option is most appropriate for your situation, please do not hesitate to reach out to us at Stat Global.

What are the Main Financing Institutions in Dubai for Real Estate Financing and Mortgages?

Dubai's central banks and financial institutions were prominent players in providing real estate financing and mortgage services. Here are some institutions that were known for offering such services in Dubai:

  1. Emirates NBD: One of the largest and most well-known banks in the UAE, Emirates NBD offers a range of mortgage and financing options for real estate investments.
  2. Dubai Islamic Bank (DIB): DIB is a prominent Islamic bank in Dubai that provides Sharia-compliant financing options, including home financing, to residents and non-residents.
  3. Abu Dhabi Commercial Bank (ADCB): ADCB is another significant player in the UAE's banking sector, offering investors various real estate financing solutions.
  4. Mashreq Bank: Mashreq Bank offers mortgage and home finance services to individuals and businesses interested in real estate investment in Dubai.
  5. First Abu Dhabi Bank (FAB): FAB is one of the largest banks in the UAE and provides mortgage and financing solutions for both local and foreign investors.
  6. Noor Bank: This Islamic bank provides Sharia-compliant financing options for real estate purchases, including residential and commercial properties.
  7. Commercial Bank of Dubai (CBD): CBD offers mortgage and financing options for property investments in Dubai.
  8. HSBC UAE: HSBC provides mortgage services to UAE nationals and expatriates interested in buying property in Dubai.
  9. Standard Chartered UAE: Standard Chartered offers mortgage and financing solutions tailored to the Dubai real estate market.
  10. United Arab Bank (UAB): UAB offers a range of financing and mortgage options for property investments in Dubai.

It's important to research the current market situation and compare the offerings of these and other financial institutions in Dubai. The terms, interest rates, and eligibility criteria can vary, so it's recommended to contact the institutions directly or consult with our agents at Stat Global to get the most accurate and up-to-date information.

About the Author

Catherine Andrea Gerdez

Content Writer at Stat Global

Catherine Andrea Gerdez is a copywriter and saleswoman originally from Caracas, Venezuela. She has a bachelor's degree in International Studies from the Central University of Venezuela. She speaks fluent English, French, Portuguese, and Spanish (her native language) and is currently learning Mandarin.

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About the Author

Catherine Andrea Gerdez

Content Writer at Stat Global

Catherine Andrea Gerdez is a copywriter and saleswoman originally from Caracas, Venezuela. She has a bachelor's degree in International Studies from the Central University of Venezuela. She speaks fluent English, French, Portuguese, and Spanish (her native language) and is currently learning Mandarin.

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