home buyer explained about schemes from the UAE government for buying property

Major Government Schemes for Home Buyers in UAE

Purchasing real estate in the UAE gives protection against inflation, promises significant earnings, and will increase in value over time. This market has witnessed a big bloom and has become more and more attractive for investors of different nationalities. To encourage more people to invest in the property market, the government has introduced new schemes to ease the process for home buyers in the country. Learning about these new schemes will be beneficial if you plan to buy a home in the UAE. Read along and discover more about them.

Dubai Land Department’s Rent-to-Own Scheme

As the name suggests, the Dubai Land Department‘s Rent-to-Own service offers people in Dubai the possibility to rent a home and buy it after a predetermined amount of time. This scheme allows tenants and landlords to agree on a purchase price, easing the transition from renters to homeowners. There are two types of rent-to-own agreements:

Option to purchase

Under this agreement, you pay a percentage of the purchase price you agree upon with the seller or renter (the option fee). However, you will lose this option fee once you decide not to proceed with the buying process.

Purchase agreement

The home buyer and the developer agree on all terms in advance. Either settle on a set price or use a future appraisal at a predetermined period to calculate the cost. Once everything is finalized, you can start the process of transferring the property.

The “Mortgage Cap” Program in Dubai

The Dubai government’s Mortgage Cap program offers qualified UAE citizens mortgage financing at a cheaper interest rate and with longer repayment terms. By providing them with more reasonable financing choices, this program intends to assist UAE nationals in realizing their dream of becoming homeowners. The Mortgage Cap program also offers assistance services to help people comprehend the mortgage process and make wise decisions, such as financial counselling.

Home Mortgage

The amount of your home mortgage also referred to as home finance, is usually determined based on your salary.

home mortgage scheme
  • Each bank establishes the minimum salary accepted as the interest rate.
  • Banks do that because they want to ensure that the loan amount will be paid back over the entire period with your salary.
  • Based on this, if you want to purchase a property, the total mortgage amount is then granted with defined monthly instalments you should pay to the bank.
  • If you are an expat, you must put down 25% of the total cost of any house or villa for sale.

The government has established the following maximum Loan to Value Ratio:

For UAE nationals

UAE nationals who are purchasing their first house:

  • For properties up to AED 5 million, the LTVR will not exceed 80% of the property’s value.
  • The LTVR will be at most 70% of the purchase price if the property exceeds AED 5 million.

UAE nationals who are purchasing their second house:

  • Those nationals will be allowed a maximum LTVR of 65% of the property’s value.

For foreigners:

  • If the property is less than or equivalent to AED 5 million, the LTVR must be no more than 75% of the purchase price.
  • The maximum LTVR for properties costing more than AED 5 million is 65% of the home’s total cost.
  • Expats can acquire second homes with a maximum LTV of 60%.

Off-plan Purchase:

  • Whether you are a national or resident, if you buy an off-plan property, the LTVR will be just 50% of its price, whatever that is.
  • As for the term of the loan, the maximum is 25 years. However, the maximum age for payment differs between nationals and residents. The maximum age for repayment is 65 for foreigners, 70 for UAE citizens, and 70 for self-employed individuals.

To sum up.

The government designs these schemes to make it easier for people planning to acquire property in Dubai. Whether foreigners or locals, they can find an option that suits them better. Those schemes will help the real estate market bloom and help investors make the most of their investments. Have you ever known about these schemes before? Are they useful for people planning to become homeowners in the UAE? You can share your comments and opinions in the comment section below. But, as always, we cannot wait to hear from you all.