The Keys to Buying the Home of Your Dreams

Buying property in Dubai isn’t cheap. However, do you know the real cost? Purchasing property in this part of the world is more expensive than you think. When you factor in the added costs, you may end up spending 10 percent more than the agreed purchase price. If you’re selling a property, you’re likely to be hit with extra costs too.

The extra costs

So where do the extra fees come from? These include a registration fee of AED 2,000 on properties below AED 500,000 and AED 4,000 on properties over AED 500,000.

Furthermore, the estate agency fee is 2 percent of the property price with conveyancing fees costing up to AED 10,000 and a valuation fee of up to AED 3,500. There are also lenders’ fees to consider and a developer’s fee which may amount to 5 percent or more of the property price.

Mortgage fees vary depending on whether you decide to take out a regular loan or Islamic finance. You may need to pay legal fees too, that’s if you decide to consult a lawyer regarding the transaction. However, this is a personal preference and not a requirement.

In October 2014, the Dubai Land Department increased its transfer fee to 4 per cent whereas it’s between 1 to 2 per cent in Abu Dhabi. What about fees after purchase? Well, you’ll need to pay AED 11 per square foot every year if you’re residing in an apartment for the developer’s annual service fee as well as

The down payment

You will need to make a deposit of approximately 25 percent on your purchase price and if you take out a mortgage, you’ll need to consider interest fees.

That means it may be worth considering whether buying property in Dubaiis really worth the investment of whether renting would be a wiser option.

Further, if you’re considering buying property in Dubai then it will help to know exactly what a mortgage in this area entails. Here are key facts you need to know.

How much can I borrow?

Expat buyers can borrow a maximum of 75% of a property’s value for a first investment of less than AED 5 million and nationals can borrow a maximum of 80% of a value worth under AED 5 million. If the property is worth more than AED 5 million than expat buyers can borrow a maximum of 60% of the value and nationals can borrow 65%.If it’s not your first investment then a maximum of 60% of the property’s value can be borrowed if you’re an expat. If you’re a national, the maximum is 65% of the value.

Are there any age limits?

If you are an expat, you must be 65 or less to borrow money (at the time of the last repayment). UAE nationals must be 70 or less. The maximum period you can borrow money over is 25 years.

Is there a minimum salary requirement?

Each bank sets a minimum salary requirement before you’re allowed to borrow money from them.

What about the amount I require?

It’s a good idea to have pre-approval for a mortgage from a bank before you look at a property. However, the bank may request a valuation of the property you want to purchase to make sure that it’s of market value. Usually a bank will accept no more than a 10% difference between their valuation and the price you have agreed to pay.

Do I need to make a down payment?

Yes, this is a requirement but how much you pay depends on whether you’re a national or expat and if the purchase is your first property.

Is there a processing fee?

Yes, there is a one-time fee which varies depending on the bank and which loan you choose.

Fixed rate or variable rate?

These are two types of mortgages. Fixed rate loans have a rate which is set for a number of years. Repayments on a variable rate loan change as the rate changes. You should choose whichever is the best option for you and your circumstances.

What is flat versus reducing balance rate?

The rate calculation on financing can be calculated in two ways. The reducing balance method charges you a rate based on your outstanding balance. The flat fee method charges you a rate based on your principal amount for the duration of the term. A mortgage is advertised as either a reducing rate or a flat rate so make sure you compare both before going ahead with either of them.

This said, there are also things to ignore while buying property in Dubai. You probably have a huge list of things you want, but what if everything doesn’t line up?

So, hold on to that dream home checklist, but take a look at our list of top things to look past whilst house hunting so that you don’t miss out on that diamond in the rough.

  • Age of the house: Not all old houses are bad and nor are all newly built houses nicer. You can always fix a dated home with some TLC; plus older houses have charm, timeless style and character that you may not find in a brand new build and even better, they may leave you more room to negotiate on the price.
  • Bizarre paint colours: A purple living room or a bright pink kitchen can be off-putting but look past bad colour choices as you can easily throw some fresh paint on the walls. Focus on the layout and placement of windows, doors and rooms instead.
  • Unappealing wallpaper: A hideous wallpaper isn’t inviting, but changing it is an incredibly easy and a cheap fix. So, don’t fret.
  • Terrible flooring: Hate the carpet or the parquet flooring? Once the house is yours, you can rip out the carpet or install your own flooring.
  • Worn out furniture: Is the furniture too old? Hate the colour of the couch? The décor leaves with the owner, so take a breath.
  • Light: No one likes to enter a cave when they’re expecting to see the bedroom, but before you dismiss a house, check if trees or hedges are blocking the light and if minor changes to the external landscaping will fix the situation.
  • Bad smells: There’s nothing a deep cleaning can’t fix, so don’t sweat.
  • Layout: You can always switch up rooms, so notice the structure of each room, not what it’s currently being used for.