Mortgage Cap For Expats Buying Homes In UAE

Expats face a cap on mortgages in the United Arab Emirates as new borrowing rules come into force.

The mortgage cap has been under discussion for some time – but the UAE central bank has confirmed they will start some time in December.

The aim is to take the heat out of the property market mainly in Dubai.

Prices have risen rapidly over the past 12 months, even though they are still significantly below the peak in 2008. The central bank tried to restrict mortgage borrowing last year, but withdrew the proposals in the face of protests from lenders who feared a loss of business.

“Banks and other financial institutions must keep to effective business standards and have controls in place for the granting mortgages,” said Central Bank Governor Sultan bin Nasser Al Suwaidi.

What the new rules mean

The new rules include:

  • A maximum 75% loan to value (LTV) mortgage on expats buying a first investment home valued at less than £850,000. For Emiratis, the LTV limit is 80%.
  • For homes worth more than £850,000, the expat loan limit is 65% LTV and 70% for locals.
  • For any additional home purchases, expat mortgages will be limited to 60% LTV, while locals can go up to 65%LTV whatever the value of the home.
  • Mortgage terms will be set at a maximum of 25 years – with the proviso that expats cannot have loans past their 65th birthday. Emiratis can take loans up to they are 70 years old.
  • Borrowing for off-plan homes is set at a maximum 50% LTV whatever the property price, buyer’s residency status or reason for buying
  • Mortgage repayments cannot be more than half of the borrower’s monthly income
  • The total loan cannot be more than seven times the buyer’s annual income for an expat – or eight years for a local.

The finer details of the rules will be officially released in November 2013 and will come into force 30 days later.

House price boom

Sultan Butti bin Mejren, Director-General of the Dubai Land Department, explained the new rules were aimed at reining in uncontrolled lending fuelling the house price boom.

“This regulation sets the parameters for the highest and the lowest lending limits and will protect the market from the danger of uncontrolled lending. The regulations will give lenders the opportunity to operate in the market with a clearer vision and mechanisms that protect borrowers from the risk of falling into arrears with their loans,” he said.

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