What is a Mortgage?
A mortgage is a secured loan used to purchase property. The property itself serves as collateral — if the borrower fails to make repayments, the lender has the legal right to repossess and sell the property to recover the outstanding debt. Mortgages are the primary mechanism through which most people finance property purchases.
The borrower makes regular repayments consisting of principal (the original loan amount) and interest (the cost of borrowing). Typical mortgage terms range from 15 to 30 years, though some markets offer terms up to 35 years.
Types of Mortgage
| Type | How It Works | Best For |
|---|---|---|
| Fixed Rate | Interest rate locked for 1–5 years | Buyers wanting payment certainty |
| Variable Rate | Rate moves with base rate / EIBOR | Buyers expecting rates to fall |
| Interest-Only | Only interest paid during term; principal due at end | Investors seeking lower monthly costs |
| Offset | Savings balance reduces interest-bearing balance | Buyers with significant cash savings |
Loan-to-Value (LTV) Ratios
LTV represents the proportion of the property value that the lender will finance. A higher LTV means a smaller deposit but typically higher interest rates and greater risk.
| Market | Max LTV (Residents) | Max LTV (Non-Residents) |
|---|---|---|
| UAE (under AED 5M) | 80% | 50% |
| UAE (over AED 5M) | 70% | 50% |
| UK | 95% | 75% |
| Spain | 80% | 60–70% |
Mortgages in the UAE
UAE mortgages are regulated by the Central Bank. Key rules include maximum LTV caps based on property value and buyer residency status, and a debt-burden ratio cap of 50% of gross income.
Most UAE banks offer both fixed-rate (typically 1–5 years) and variable-rate products pegged to EIBOR (Emirates Interbank Offered Rate). A 0.25% mortgage registration fee is payable to the Dubai Land Department on the loan amount.
Early settlement fees in the UAE are capped at 1% of the outstanding balance or AED 10,000 (whichever is lower) for variable-rate mortgages, and 3% of the outstanding balance for fixed-rate mortgages during the fixed period.
Get mortgage pre-approval as a non-UAE resident
Our recommended mortgage partners assess non-resident eligibility within 48 hours, at no cost. They cover major UAE banks and can advise on optimal LTV for your nationality and income structure.
Request free mortgage assessmentMortgage Costs & Fees
- Arrangement fee: Charged by the lender for setting up the mortgage (typically 0.5–1% of loan value)
- Valuation fee: Cost of the lender's property valuation (AED 2,500–3,500 in Dubai)
- Mortgage registration: 0.25% of loan amount payable to DLD in Dubai
- Life insurance: Required by most UAE lenders, decreasing term policy covering the outstanding balance
- Property insurance: Building insurance is mandatory for mortgage properties
Risks of Mortgage Borrowing
Mortgages carry significant financial risks that buyers should assess carefully:
- Interest rate risk: Variable rates can increase substantially — a 2% rise on a AED 2M loan adds approximately AED 40,000 per year to repayments
- Negative equity: If property values fall below the outstanding loan balance, the borrower cannot sell without covering the shortfall
- Currency risk: Non-residents earning in a different currency face exchange rate exposure on repayments
- Repossession: Failure to maintain repayments can result in the lender seizing and selling the property
- Early repayment penalties: Breaking a fixed-rate mortgage early typically incurs fees of 1–3% of the outstanding balance