26/06/2024
Replying to ( How to Buy a Property in Dubai without Down Payment?)
You cannot buy a property without a down payment, but there is a way to buy a property if you do not have the funds for it.
As you might know, to buy a property in Dubai, even through a mortgage, a down payment is required, and the bank will not transfer the funds to pay off the property to the developer or owner until you provide proof that you paid your down payment amount.
4 years ago, the Central Bank of UAE increased the LTV Ratio, and all banks followed suit.
This means that banks will finance from 65 % up to 80% of the apartment price for expats, but there is still a 20% required down payment.
Hey, it's better than the 25% required just a few years ago!
Now, how can you overcome the step of down payment even if you do not have the funds for it?
The Answer: Personal Loan
A Personal Loan is different from a Home Loan (Mortgage) as it can be raised for various purposes, one of them being the down payment.
A personal loan has a lower limit than a mortgage and needs to be paid off in a maximum of about 4 years (might be some extra time for some banks).
Note that you cannot take a personal loan and a home loan at the same time from the same bank under your name.
If you are doing everything by yourself, then you first take the personal loan to cover the down payment amount as the banks require a time period of 3-6 months to pass before you apply and get a home loan.
You can use this to your advantage and buy a property that is going to be completed in that time. Usually, upcoming properties have better quality and overall finishing, so when you have to wait, it may be for a good thing. Or you apply for a home loan with one bank and a personal loan with another at the same time.
An easier or quicker way, for example, is a husband takes the personal loan under his name and the wife takes the home loan under her name. That way, the risk is much lower, and the distribution of payments between you is easier to handle.
Let's say you are buying a brand-new 1-bedroom apartment which will cost you 1 million AED.
Down Payment Required: 20% which is 200,000 AED
Remaining Balance: 800,000 AED to be covered by the bank
Your monthly rate for the personal loan would be approximately 5,000 AED (see picture above) while your monthly rate for the home loan would be approximately 4,500 AED (if the payment tenor is 25 years).
The example of the purchase above has other fees such as DLD Transfer Fee and Administration Fee waived, but is an actual deal I provide.
Check with your preferred banker in detail before taking action.
