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Published On: Mon, Apr 22nd, 2019

How Much House Can You Afford as a UAE National

As a UAE national, your mortgage deposit will be 20 percent. However, there will be other fees you will have to keep in mind that aren’t included in your loan. When making your budget to present to a mortgage lender, you will also be required to disclose your debts. Given these factors, let’s talk about how much house you think you can afford vs how much you can actually afford.

photo/ mohamed Hassan

In this example, we’re going to use our imaginary friend named Khalid. Khalid makes Dh25,000 per month. He would like to purchase a home selling at 1,000,000 AED.

Debts and Expenses

Before making his budget, Khalid needs to determine what his current debts are. In the UAE, mortgage lenders take this into consideration when processing applications. Why? Because a lender will not allow any mortgages to buyers whose monthly mortgage repayment is 25 percent of their monthly income? Your expenses are counted against your income; what is left is what remains for your mortgage repayment.

Debts, in this case, are considered to be car loans, personal loans, and credit card debt. Khalid’s monthly payment for his car is Dh2,000. He also has a monthly credit card debt of Dh500 and a monthly personal loan repayment of Dh1,000. His monthly mortgage payment would be Dh5,601 for the Dh1,000,000 home he wants.

In this example, after his expenses, Khalid is left with Dh21,000 in income. However, now, his mortgage repayment of 5601 is more than 25 percent of his monthly income. Twenty-five percent of his monthly income is Dh5375. In this example, Khalid may be denied for a mortgage.

It is advisable to clear debts before applying for a mortgage. This way, your income to debt ratio is higher.

photo Alina Ku-Ku via Shutterstock

Fees and Extra Costs

There are quite a few fees associated with buying a home that a mortgage loan does not cover.

Land Department Fee

A land department fee is charged when purchasing a home. This is approximately 4% of the total purchase price. For Khalid, this is Dh40,540.

Registration Fee

A home registration fee of approx. .4% is also charged. This would be an additional Dh4,000 for Khalid.

Mortgage Registration

The mortgage being applied for also has to have its own registration. This is charged at a rate of about .2% for a total of Dh2,010.

Estate Agency Fee

The agency fee is approximately an additional 2% of the purchase price, which is Dh21,000.

Valuation

A home valuation fee is required when a mortgage is approved. This happens when a buyer enters into negotiation with a seller. This approval is dependant on the valuation. When the home is deems overvalued, the lender can refuse the loan. This valuation is .315% of the house price. That is Dh3,150.

In total, in order to purchase his 1,000,000 AED home, Khalid will have to pay an additional 70,700 AED. This is not covered by the loan. So if you were Khalid, you’d have to save up an additional Dh70,700 to cover the costs of these fees before you would begin the process of house hunting.

Author: Digital Solutions

About the Author

- Outside contributors to the Dispatch are always welcome to offer their unique voices, contradictory opinions or presentation of information not included on the site.

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    […] How Much House Can You Afford as a UAE National – As a UAE national, your mortgage deposit will be 20 percent. However, there will be other fees you will have to keep in mind. […]

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    […] How Much House Can You Afford as a UAE National – When making your budget to present to a mortgage lender, you will also be required to disclose your debts. Given these. […]

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    […] How Much House Can You Afford as a UAE National – Your expenses are counted against your income; what is left is what remains for your mortgage repayment. Debts, in this case, […]

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    […] How Much House Can You Afford as a UAE National – Given these factors, let’s talk about how much house you think you can afford vs how much you can actually afford. whose monthly mortgage repayment is 25 percent of their monthly income? Your. […]

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    […] How Much House Can You Afford as a UAE National – When making your budget to present to a mortgage lender, you will also be required to disclose your debts. Given these factors, let’s talk about how much house you think you. Khalid’s monthly. […]

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    […] How Much House Can You Afford as a UAE National – When making your budget to present to a mortgage lender, you will also be required to disclose your debts. Given these factors, let’s talk about how much house you think you can afford vs how.. […]

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    […] How Much House Can You Afford as a UAE National – Khalid’s monthly payment for his car is Dh2,000. This valuation is .315% of the house price. That is Dh3,150. In total, in order to purchase his 1,000,000 AED home, Khalid will have to pay an. […]

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