Off-Plan Mortgage in Dubai: Process, Benefits and Eligibility Criteria

How Do Off-Plan Mortgages Work?

Let us first understand what a mortgage for an off-plan property is. 

As explained, off-plan properties are still under construction, and people buy them based on the project plan and blueprint provided by the developer.

Such properties have a specified handover date, payment plans, and construction phases. The buyer becomes the owner only when the property has been completed. You can refer to our off-plan guide for detailed information about this property type. 

Whilst relatively uncommon, mortgages for off-plan properties are permitted by the Dubai authorities, with some banks offering this option. If you want to obtain a mortgage for an off-plan property in Dubai, you should be aware of the loan-to-value ratio (LVR) - 50% of the value of the completed property. 

For example, if an off-plan property is valued at AED 1,000,000 - the maximum mortgage you can obtain from a bank is AED 500,000; or 50%. This amount remains the same, whether you choose to buy an apartment, villa, or townhouse. 

This means a 50% down payment from the buyer is necessary for an off-plan property purchase. This rate could increase depending on the developer and project. 

Banks do not offer off-plan property mortgages for all real estate developers in Dubai, so you should research before approaching a bank. Some developers whose property you may be able to get a mortgage are:

• Emaar

• Nakheel 

• Dubai Properties 

• Meraas 

There are also different kinds of mortgages for off-plan properties you can opt from, including:

• Fixed-rate mortgages 

• Variable-rate mortgages 

Eligibility for an Off-Plan Mortgage in Dubai

How do you know whether you are eligible for an off-plan mortgage in Dubai? It is relatively simple. 

Obtaining a mortgage for an off-plan property in Dubai is no different from obtaining a regular mortgage. 

You should ensure that the developer is on the approved list of developers against which a bank is willing to lend a mortgage. Each bank will have subjective criteria for assessing off-plan property mortgage applicants. But rest assured, it is no different than applying for a regular mortgage - if you meet the eligibility criteria, like age and salary history, you could be approved.

Advantages & Disadvantages of Off-Plan Mortgages

To make an informed decision about an off-plan mortgage in Dubai, it is important to weigh both the advantages and disadvantages:

Potential Advantages

• As off-plan properties are generally cheaper, your mortgage amount could also be lower than that of a finished property.

• Potential for Capital Appreciation: Investing early can lead to property value appreciation by completion, offering significant returns on investment.

• Customization Opportunities: Off-plan property buyers might have the chance to personalize aspects of the property’s design and finishes, tailoring it to their preferences.

Potential Disadvantages:

• Higher Down Payments: With a 50% LTV cap, buyers must pay at least half of the property value as a downpayment

• Limited Financing Options: Not all banks offer mortgages for off-plan properties and those that do often restrict financing to projects by well-established developers.

• Interest Rate Changes: Off-plan mortgages may come with variable interest rates, which can fluctuate based on market conditions.

Off-Plan Mortgages vs. Traditional Mortgages

When you mortgage an off-plan property in Dubai, there is no difference in the mortgage system. However, there will be a difference in your property-buying journey. 

Here are some things to keep in mind when you buy an off-plan mortgage property:

• Ensure that you receive the off-plan mortgage pre-approval to avoid any delays in buying a property. 

• Delays in an off-plan project may impact your payment cycle and plan to become a homeowner. 

• Decide a mortgage cycle with the bank and developer so that there are no delays in payment. 

How to Apply for an Off-Plan Mortgage in Dubai

Here are some steps you could follow for an off-plan mortgage in Dubai:

• Find a bank that provides mortgages for off-plan properties in Dubai. The lender or bank must be registered with the Dubai Land Department. 

• Discuss your budget, property, and finances with the bank to select the right off-plan mortgage plan. For more clarity, you can also use online mortgage calculators.

• Obtain your mortgage pre-approval, an official document the bank gives as proof of your eligibility for a housing loan. It usually takes three to five working days to obtain. 

• Once you have found your dream off-plan property and applied to buy it, you can finalize the purchase process with the developer. After reviewing everything, the bank will release the loan amount. 

Conclusion

While obtaining off-plan mortgages in Dubai is relatively straightforward, it can seem daunting—especially to first-time buyers in the city. 

This is where Engel & Völkers steps in. With over 45 years of unparalleled expertise, Engel and Völkers is here to facilitate your real estate journey in Dubai. 

Be it understanding off-plan mortgage policies or finding the perfect home, contact us to kickstart your journey.