Buying your dream home is one of the most exciting things you can do in life. Finding the perfect property in Dubai means browsing the internet, meeting with agents and developers, talking with friends and family, physically visiting properties, and then making your final decision on the right house for you. Once that’s all done, it’s time for something less exciting but of huge importance, checking out the different types of mortgages in Dubai available to you. Most people buy houses on a mortgage, but there are some people who can afford the outlay of buying a property with cash. For anyone deciding between the two purchasing options, here’s our guide to buying a property in cash vs mortgage.

So, next up is an overview of the different types of available mortgages in Dubai, including the mortgage repayment options and different terms that you should be familiar with.

Before you apply for a specific type of mortgage, it’s also important to get a pre-approval letter from the bank, so you are well informed about the maximum amount of housing finance that you qualify for. Bayut has recently partnered with ADCB to provide instant pre-approvals online in Dubai and other parts of the UAE through the ADCB Dream Home Platform. For a comprehensive understanding of the entire process involved in securing housing loans in Dubai, take a look at this detailed guide on how to get a mortgage in Dubai.

TYPES OF MORTGAGES IN DUBAI

Potential homeowners can find different types of mortgages in Dubai on offer. Given that it is a long term commitment, it is essential you understand the pros and cons before making a selection.

Looking to buy a home in Dubai? Here are the different mortgage types available in the city.

FIXED RATE MORTGAGE

As the name suggests, the interest rate is set before the loan term’s onset in a fixed-rate mortgage. Also, this rate doesn’t change throughout the pre-agreed period, which generally is under five years. However, you might be lucky enough to find a lender offering a full period of the loan repayment at a fixed-rate.

There are clear advantages for the borrower with this system. It’s easier to budget and plan your financial outlay for a number of years at least. Nevertheless, if the market situation changes and rates go downward, you will be stuck with the original rate. Alternatively, if the rates go higher, you’ll be at an advantage with your fixed-lower-rate.

As a borrower, you must study the market or seek expert help to understand all the available mortgage types in Dubai. If rates are likely to go down soon, a fixed-rate mortgage isn’t the best option.

VARIABLE INTEREST RATES

For variable interest rate mortgages, the interest rate can change throughout the period of repayment depending on market conditions. Borrowers can end up getting a lucrative deal if the market conditions dictate, or they can also end up paying a higher rate of return. If you opt for this type of loan, make sure you have the financial liquidity to handle any increase in repayments.

DISCOUNTED RATE MORTGAGE

In some cases, getting a discounted rate mortgage can be the best option among the different types of mortgage in Dubai. The borrower ends up paying a lower amount because financial help is provided on the variable interest rate the borrower is paying. This cut is, however, for a short period. In the long term, you will be paying a variable rate.

CAPPED MORTGAGE

Types of mortgages in Dubai also include capped mortgages where the borrower has some advantage. You will make payments at a variable rate but a maximum cap is set before the loan term begins. Often, the capped period can be for a limited time. The interest rates do go up depending on the market conditions, but a limit is applied beyond which the rate will not increase.

REMORTGAGE

If you make a costly mistake with your initial mortgage plan, this is one of the useful types of mortgages in Dubai to help you reset. With a remortgage option, you can get a new loan on an existing mortgage or even a transfer of the existing mortgage. Interestingly, this new loan can also be offered by the same lender or you can find a new one. At times, even when the interest rate is low on the initial loan, people opt for a remortgage as they need additional funds.