How much down payment do you need for a mortgage?
The down payment requirements for a mortgage in Dubai vary depending on a few factors such as whether you are an expatriate, a UAE national or a non-resident, as well as the type of property you are buying.
In Dubai, the Central Bank of the UAE has set specific requirements for the size of the down payment required for a mortgage. These requirements were introduced to provide additional stability to the property market, reduce speculation and ensure that buyers have sufficient equity in the property and are not excessively indebted.
The mortgage down payment requirements are:
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Expatriates: If you want to buy a property in Dubai as an expat, you will need a minimum deposit of 20% for properties valued under AED 5 million. For properties over AED 5 million, the minimum deposit is 30%.
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UAE nationals: For Emirati citizens, the deposit required is slightly lower. For properties under AED 5 million, the minimum deposit is 15%, while properties over AED 5 million require a 25% deposit.
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Non-residents: Although non-residents can qualify for a mortgage in Dubai, a significantly higher down payment of at least 40% of the purchase price is required.
Typical down payment requirements by mortgage type
Mortgage down payment requirements can also vary depending on the type of mortgage you choose. There are a number of different mortgages in Dubai with different structures and down payment requirements.
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Fixed rate mortgages: With a fixed-rate mortgage, the interest rate stays the same for a specific period of time, usually 1-5 years. This option is popular with buyers who prefer predictable payments. Down payment requirements for fixed rate mortgages typically follow the same guidelines of 20-30% for expatriates and 15-25% for UAE nationals, depending on property value.
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Variable mortgages: Interest rates on adjustable rate mortgages fluctuate with market conditions. This can mean lower interest rates when conditions are favourable, but can also mean higher repayments if market conditions deteriorate. The down payment requirements for adjustable-rate mortgages are typically the same as for fixed-rate mortgages.
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Offset Mortgages: If you have cash in the same bank as your mortgage, you could get an offset mortgage. This type of mortgage allows you to reduce the amount of interest you pay on the loan based on your savings balance. These mortgages can have higher down payment requirements, often starting at 25-30% of the purchase price.
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Investment properties: If you are looking for an investment property such as: If you are purchasing a rental property, such as a rental property, the down payment requirements may be higher, often 25-40%. This is because investment properties are considered riskier, so lenders require greater security.
Factors Affecting Down Payment Requirements
There are several factors that can affect how much down payment is required for a mortgage. Whether you’re thinking about how much down payment you need for a first-time buyer mortgage or an investment property, understanding these factors can help you prepare for the financial commitment of purchasing a home.
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Property value: The price of the property you are purchasing is a key factor that influences the down payment. As mentioned earlier, properties priced above AED 5 million require a higher down payment percentage.
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nationality: Whether you are an expatriate or a UAE citizen significantly influences the down payment percentage, with expats requiring a higher down payment than citizens.
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Creditworthiness: Your personal credit rating will also influence the amount of down payment required. Buyers with good credit may find that they qualify for more favorable down payment terms, while banks may require a higher down payment from those with poor credit.
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Lender Policies: Different banks and lenders may have different policies for down payment requirements. Comparing mortgage options at different banks, particularly by working with an experienced mortgage broker, can help you find the most appropriate product and down payment requirements for your situation.
How much should you save for a down payment?
When buying a property in Dubai, it is important to set a realistic savings goal for your down payment. As a rule of thumb, you should save at least 20% of the property’s value for the mortgage down payment.
Here is a quick overview of the minimum down payment expats and UAE nationals need to purchase a property based on different property prices.
