Complete 2023 Guide.

Buy To Let Mortgage
Guide Dubai

Buy To Let Mortgage Guide Dubai

The Beginners Guide to Buy to Let Dubai Mortgages in 2023

The Dubai property market has quickly become one of the most exciting in the world.

With excellent rental income potential, low prices, and practically zero property taxes, more foreign nationals and expats are choosing buy to let property in Dubai as an investment in 2022.

As a result, buy to let mortgage demand has sky-rocketed, with mortgages now easier than ever to get in Dubai.

You can learn more about Dubai buy to let mortgages and Dubai buy to let in this blog. Below, you’ll find topics like:

  • How to apply for a Dubai Buy to let mortgage
  • The best buy to let locations in Dubai 2022
  • How to choose the right buy to let property in Dubai?
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What is a Buy to Let Mortgage?

If you want to become a landlord, you’ll need a buy to let mortgage.

Buy to let mortgages are specialist mortgages designed specifically for investors looking to buy real estate to rent to tenants.

BTL mortgages tend to be more expensive than traditional mortgages, with higher deposits and interest rates.

There are two main types of BTL mortgages available in Dubai.

  1. Repayment mortgage – You’ll pay a set amount each month for the length of the mortgage agreement.
  2. Interest-only mortgage – You’ll pay the interest of your loan every month without touching the overall debt. Come the end of your mortgage term, you’ll then have to pay your loan back – typically achieved by selling the property.

What If I Get a Residential Mortgage on a Dubai Buy to Let?

Residential mortgages are only intended to be owner occupied. As such, if you use a residential mortgage on rental property and are caught, you will be in breach of your agreement.

This could mean paying extra charges, or even having to pay the entire loan back in full.

Who Can Get a Mortgage in the UAE?

Buy to let mortgages are available to foreigners, expats, and citizens of Dubai as long as they meet certain criteria.

  1. You’ll need to be in your current job for a minimum of six months, however this depends on the area of Dubai you’re investing in.
  2. If you’re self-employed, you’ll need to have run your business for at least two years.
  3. Some banks will only accept applicants if you work for a certain company. This is an unusual quirk of the Dubai buy to let mortgage system that benefits those working for government departments, banks, or multi-national organisations, but can be an issue of employees in smaller companies.
  4. You will need a clean credit history with a good credit score.

How Much Are Buy to Let Mortgages in Dubai?

As of January 2022, average mortgage rates start at 2.75% for a one-year fixed rate loan. This increases to 3.88% for a three year term, and 3.98% for five years. These rates can drastically change depending on several factors.

This includes:

  • The length of the mortgage term.
  • Whether it’s a fixed or variable rate mortgage.
  • The bank you’re borrowing from.
  • If you’re buying a second property.

You’ll also need to factor in the down payment required for mortgages and home loans. For expats taking out residential mortgages, a deposit of 25% is common for properties worth AED five million.

However, buy to let mortgages will need far higher deposits, often falling between 40-50%.

A report from Gulf News revealed that mortgage rates are set to increase in 2022, so be sure to keep this in mind when planning to secure Dubai properties and buy to let.

When taking out a buy to let mortgage in Dubai, you will also pay a 0.25% fee to register your loan.

A lender may also require you to pay for mortgage protection insurance and a valuation fee.

Other Expenses to Consider

While a mortgage down payment and monthly interest rates will be the most common costs for a Dubai buy to let mortgage, you’ll also need to factor in some potential expenses.

Alongside potential service fees, you may also have to pay brokerage fees if you opt to use a mortgage broker to find the best rates.

Interested in Dubai property investment? View our complete guide.

How to Apply for a BTL Mortgage in Dubai?

The mortgage process is quite simple in Dubai, with the ability to secure your mortgage in just six steps.

  1. Approach a bank directly or use the help of a mortgage broker.
  2. Choose the correct mortgage suited to your needs. For landlords, you’ll need a buy to let mortgage.
  3. Acquire an agreement in principle from your bank. You should ask for a letter to provide evidence of your agreement. This is important, as it will allow you to make an offer on a home before making a complete application.
  4. Pick the right Dubai investment property that fits in your budget and then make an offer.
  5. After agreeing the price, you will then pay a deposit and agree a completion date.
  6. Once you reach the agreed completion date, your mortgage lender will provide the agreed funds to the seller.

It’s important to note that this process will change slightly if you choose to invest in off plan property, as off plan properties are usually more difficult to secure mortgages for.

This is because off plan is seen as a higher risk as it could be several years before the development reaches completion.

What Mortgage Lenders Are There for Expats in Dubai Buy to Let?

While there are over 30 lenders now offering mortgages in Dubai, not every single one offers loans to expats or foreign investors.

And even if you decide to borrow from a foreign bank, lenders are only allowed to loan in the UAE if they’re recognized by the central bank.

The main mortgage lenders for expats in 2022 are:

  • HSBC – Mortgages are only available for selected developments, and you’ll need to earn a minimum of AED 15,000 a month.
  • Mashreq – A UAE-based bank that loans up to AED 10 million. You will also need to earn at least AED 15,000 a month.
  • Emirates NBD – This Dubai government-owned lender loans up to AED 15 million.

What Documents Do You Need to Get a Mortgage in the Dubai Property Market?

You’ll need three important documents when applying for a mortgage.

They are:

  • A copy of your passport.
  • Proof of residence in the UAE and proof of current address (if you aren’t from overseas).
  • Important financial documents, including proof of salary and bank statements.

The documents needed may change depending on who you are lending with.

If you’re from overseas and looking to invest in Dubai and the UAE, this can get more complicated.

The British Government advises finding an English speaking lawyer who is local to the UAE who can help you and provide advice. A local lawyer is vital in this scenario, as foreign lawyers have no legal jurisdiction.

You can find a list of lawyers here.

Can You Refinance Your Mortgage in the UAE?

Yes, you can refinance your mortgage in the UAE, and this may be a good thing to do.

The mortgage market within the UAE is incredibly competitive and has resulted in banks looking to undercut their competitors and provide discounted fixed periods on home loans.

If you’re considering switching, be sure to talk to your bank or lender first, as they may reduce rates on your current mortgage.

You may also need to pay to switch mortgages, which is et at a maximum fee of 1% of the balance, or up to AED 10,000 depending on which one is lower.

How to Choose the Right Buy to Let Property in Dubai?

Buying property can be complicated, and this can especially be true in Dubai.

With foreign buy to let investors only able to invest in certain areas of the UAE, you’ll need to carefully choose where you want to invest in, and what type of property you should buy.

As such, keep in mind the following tips for how you can buy the right investment properties in the Dubai rental market.

  1. Decide between off plan property and already built properties. Off plan properties tend to be cheaper than already built properties, and can usually be paid with payment plans. The downside is it can be difficult to secure a mortgage, and you’ll have to wait for the property to be completed before you can start earning returns.
  2. If you choose to buy off plan, be sure to research the developer or real estate agent, and check if they are approved by the Dubai Land Department. Research includes checking out other properties that the developer has completed, and making sure they are of good quality.
  3. Make sure you can purchase property as a foreign investor in your selected area.
  4. Ensure your chosen lender has approved your loan. Make sure you factor in the costs of repaying the mortgage and deposit with the running costs of your property.
  5. Get legal advice from a local lawyer to make sure you’re aware of your legal responsibilities and contractual obligations of buying a Dubai investment property.

What Are the Best Buy to Let Locations in Dubai?

Not every area is made equal when it comes to buying property, with different buy to let locations offering a mix of rental prices, purchase prices, and rental demand.

As such, we’ve taken a deep dive into average rental yields in Dubai provided by the Property Monitor Dubai Sales Index to identify the best buy to let locations in Dubai 2023.

If you want to go into more detail about the best buy to let locations in Dubai, and learn about popular areas like Dubai marina, Arabian Ranches, Downtown Dubai, Palm Jumeirah, and Business Bay, then be sure to read our guide to Dubai property investment in 2023.

According to the data, the best Dubai real estate areas that generate the highest rental yields include:

  • Discovery Gardens
  • Remraam
  • International City
  • Dubai Investments Park
  • Dubai Studio City

Here, you can find Dubai properties from as low as AED 435 per square foot, with current rental yields as high as 8.59% in Discovery Gardens

Of course, rental yields aren’t the only measurement to consider, with capital growth another vital component of a successful property investment.

While we don’t have data showing long-term growth, we can compare prices over the last month or so to see how much properties have grown in an area in a short-term basis, with the assumption that these growth rates will continue in the future.

The best areas for capital growth in Dubai are currently:

  • Barsha Heights
  • Dubai Creek Harbour
  • Dubai Residence Complex
  • Palm Jumeirah
  • City Walk

These areas have seen house price increases of over 3%, with the Dubai Residence Complex seeing a huge 5.75% increase in AED per square foot.

Looking for more information on Dubai? View our complete Dubai property guide.

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