Home loans have soared in popularity in the UAE in recent times, with a sizeable portion of the population opting for this means of purchasing a new property. With different fees, terms, and conditions offered by various providers, it is wise to compare plans to find the best fit for your needs.
Content Recap:
Mortgages and home loans can be complex to understand in general, regardless of whether you’re a UAE national or not. Nonetheless, by grasping the details, you can familiarize yourself with the financial market. Should you apply for a home loan, you’ll need to meet various eligibility requirements, including nationality, credit score, monthly income, and other factors that vary depending on the provider.
Eligibility Criteria for Mortgage Loans in the UAE
Several banks and financial institutions operate in the UAE, offering different types of home loans with varying features, interest rates, and eligibility requirements.
While every provider has different requirements, the general eligibility criteria for mortgage loans in the UAE are somewhat standard. They are:
- The applicant must be a national/resident or expat.
- Individuals applying for the loan should be at least 21 years old, while the maximum age limit is generally 65-70 years old.
- Expats should have a minimum monthly income of AED 15,000.
- UAE nationals should have a minimum monthly income of AED 10,000
In the UAE, mortgages are available to non-residents, but the available options are limited. Only a few lenders offer loans to non-residents.
Self-employed individuals can also apply for home loans in the UAE, provided they have been in their business for at least two years.
Factors Affecting Home Loan Eligibility in the UAE
Seeking out a mortgage loan can be overwhelming. With so much to consider in terms of where to begin, what to look for, and what lender and mortgage to select, it can be challenging to decide. Nevertheless, becoming informed about mortgage loan eligibility criteria can help avoid confusion and prevent complications. Some factors that affect home loan eligibility include:
- Age
- Credit Score
- Employment Status
- Long Term
- Debt-to-Income Ratio
1. Age
The terms of the loan and home loan eligibility are inversely related. As a general rule, the younger you are, the lower the risk, making it smoother to navigate the loan approval process. On the other hand, the older you are, the greater the risk, potentially making it more difficult. The minimum age requirement for most banks is 21 years. Expats generally have an age limit of 65 years, while UAE nationals have one of 70 years at most.
2. Credit Score
Among all the key factors, the credit score is one of the most critical criteria for home loans in the UAE. A credit score is a three-digit number ranging from 300 to 900, providing an overview of the borrower’s financial history. The borrower’s ability to repay the loan is determined by scrutinizing the loans, dues, and other factors. Lenders may hesitate to grant loans to borrowers with poor credit scores, and those who do generally charge higher interest rates than those with better scores. Maintaining a good credit score is crucial for straightforward home loan eligibility.
3. Employment Status
Every lending institution has different criteria for issuing loans. Servicers may require a higher monthly salary for salaried individuals applying for larger loan amounts. Repayment capacity is a top concern for lenders in judging whether borrowers will pay back the loan. Self-employed borrowers are generally considered riskier and are therefore subject to different parameters, such as financial stability, income stability, and repayment capacity.
4. Long Term
By selecting a long-term loan repayment plan, you can qualify for more lenient eligibility requirements. As such, your monthly repayment amount will be lower, although the interest rate will be higher. You’ll be spending less of your income on loan repayment. However, the total interest you pay in the end will be much higher compared to short-term plans.
5. Debt-to-Income Ratio
This ratio measures the amount of debt you owe compared to your income. Lenders use this to evaluate your repayment capacity. To calculate this ratio, divide your current monthly debt by your average income, then multiply the result by 100. All forms of debt, such as student loans, personal loans, credit cards, and other debts, should be taken into account. To avail of further debt, your debt-to-income ratio should be below 50%.
What Documents are Required for a Home Loan?
The following documents are required for home loan eligibility in the UAE:
- Payslips and bank statements for the previous 3-6 months
- Passport, Visa, and Emirates ID Copy
- Salary Certificate
- Recent Credit Card Statements
- Copy of Dubai Electricity & Water Authority (DEWA) Bill or Lease Agreement Confirming Your Current Address
Takeaway
When choosing a repayment plan, opting for a long-term plan can help reduce your monthly debt. It’s important to remember that you’ll end up paying additional money in interest, however. To keep your debt-to-income ratio in check while also making it easier to repay, select lower monthly payments. Always pay on time and be punctual with payments. Ensure you make all of your additional income available to repay your debts and have a smooth loan closing process.