For most potential buyers, especially first time buyers, the biggest challenge to getting on the housing ladder is raising the initial down payment required to get a mortgage. Earlier this year, the Central Bank of the UAE increased the loan-to-value amounts for first time buyers in the UAE by 5%, to 80% for expats and 85% for UAE nationals. This means that banks are now allowed to lend more, so borrowers require a smaller down payment. The new regulations have reduced the down payment required by first time buyers to 20% for expats and 15% for UAE nationals (for purchases under AED 5 million), from 25% and 15%, respectively.
The reduction in down payment requirements makes buying more achievable for some since it means less cash is required upfront. Put into context, for a property purchase of AED 1 million, previously a down payment of AED 250,000 would have been required. Whereas now, as an expat for example, you would need just AED 200,000 – a saving of AED 50,000!
This is an exciting prospect for many potential first time buyers in the UAE as it can help in taking some pressure off when it comes to raising the down payment, or in cases where you have the down payment ready, this reduction can help make your money go further.
In addition to the down payment there are certain fees associated with purchasing which are also required upfront, this is an aspect sometimes overlooked by buyers early in the process. Purchasing costs are normal in most countries, generally made up of fees and taxes. In Dubai the fees amount to approximately 7% of the purchase.
| You can read more about the fees associated with buying in Dubai here. |
To help buyers further, especially where upfront cash may be an issue, a select number of banks allow you to include some of the purchasing fees within the mortgage.
| You can read more about including fees within the mortgage here. |
Prior to the recent increase in borrowing capacity (loan-to-values) by the Central Bank, including fees within the mortgage would enable you to raise your buying power by up to 18%. However, following the changes this can now increase buying power by up to 24%!
As an example, in 2019 if you had a down payment of AED 500,000 ready, you would have been able to afford a property of up to AED 2 million. In this scenario, if you then included some of the fees within the mortgage (namely, 75% of the 4% DLD fee and the 2% real estate fee), the savings made in the upfront cash required could be put towards raising your down payment and increasing your buying potential by 18% – so you could afford a property of up to AED 2.95 million. This example is illustrated in the table below.
| Not including fees | Including fees | |
| Purchase price | AED 2,500,000 | AED 2,950,000 |
| Down payment required | AED 625,000 | AED 737,500 |
| DLD fee | AED 100,000 | AED 29,500 |
| Agent fee | AED 50,000 | AED 14,750 |
| DLD fees (miscellaneous) | AED 9,758 | AED 9,758 |
| Valuation fee (approx.) | AED 3,150 | AED 3,150 |
| Total cash required | AED 787,908 | AED 794,658 |
Let’s now look forward to today, continuing with the same example of a down payment amount of AED 500,000. With a down payment requirement of 20%, you can now purchase a property of AED 2.5 million instead. Then, to go a step further we can again include the fees within the mortgage. At this stage we can include 80% of the DLD fee and real estate agent fee, in line with the increased loan-to-value ratio, raising your buying potential by a massive 24% up to AED 3.1 million!
| Not including fees | Including fees | |
| Purchase price | AED 2,500,000 | AED 3,100,000 |
| Down payment required | AED 500,000 | AED 620,000 |
| DLD fee | AED 100,000 | AED 24,800 |
| Agent fee | AED 52,000 | AED 15,500 |
| DLD fees (miscellaneous) | AED 10,370 | AED 10,370 |
| Valuation fee (approx.) | AED 3,150 | AED 3,150 |
| Total cash required | AED 666,020 | AED 673,820 |
Including the fees within the mortgage is a great option to help save on upfront costs and make your money go further. Find out how much further your funds can go, get in touch with us today!
