In this article you will find answers to one of the first questions that buyers have when starting the homebuying process: How much do I have to pay to buy a house in Dubai if I need a mortgage?
Understanding the Costs Involved in Purchasing a Property with a Mortgage in Dubai
Buying a house is always an exciting adventure, but it's also full of new processes, information and also many costs. At Nomad Homes, we understand this, which is why we want to dedicate this article to help you understand all the costs you will be facing if you buy a property with a mortgage.
Understanding Upfront and Ongoing Costs
1. Upfront Costs for Mortgage Buyers in Dubai
Upfront costs refer to the initial expenses incurred by buyers when purchasing a property, including the down payment, transfer fees, registration fees, mortgage fees, conveyance fees, and other associated charges. These costs are essential for buyers as they represent the financial obligations and investments required at the beginning of the property buying process.
1.1. Down Payment: Determining the Initial Investment
The down payment refers to the upfront amount of money that a buyer needs to pay when purchasing a property. It is a crucial part of the initial payment and is typically expressed as a percentage of the total value of the house. In most cases, the down payment represents at least 20% of the property's total value.
The buyer's contribution towards the down payment will impact the mortgage amount they need to request from a lender. Essentially, the down payment is the buyer's initial investment in the property, demonstrating their financial commitment and reducing the loan amount needed to finance the purchase.
1.2. DLD Transfer Fee: Tax Implications for Buyers
This fee is paid to the Dubai Land Department as a tax for the property transfer. Its cost amounts to 4% of the total value of the property.
1.3. DLD Property Registration Fee: Ensuring Legal Compliance
All property purchases in Dubai must be registered with the DLD, incurring a cost of 4,000 AED + 5% VAT.
1.4. DLD Mortgage Registration Fee: Additional Costs for Mortgage Buyers
This fee is the consequential charge for purchasing a property with a mortgage in Dubai. It is also payable to the Dubai Land Department and amounts to 0.25% of the total loan + 290 AED.
1.5. Conveyance Fee: Agent Assistance and Legal Security
The conveyance fee is a payment made to secure legal representation and ensure accurate contractual arrangements. In the UAE, appointing a real estate agent serves as a guarantee that all legal terms and contracts are accurately established according to the prevailing legislation. The amount, ranging between 3,000 and 6,000 AED, is directly paid to the chosen agent.
1.6. Title Deed: Getting Ownership Documentation
This payment represents the establishment of the property's deed and costs 580 AED.
1.7. Bank Mortgage Processing Fee: Financial Institution Charges
This expense refers to the fee associated with the processing of the mortgage. In this case, the total cost of this procedure would amount to 0.5% of the total loan amount + 5% VAT. It varies depending on the banking institution with which the mortgage is formalized.
1.8. Property Valuation Fee: Assessment of the Real Property Value
This cost arises from the valuation of the property being purchased. It is crucial and decisive in determining the real value of the property. The price ranges between 2,500 and 3,000 AED+ 5% VAT.
1.9. Broker Fee: Commission for Expert Assistance
This payment corresponds to the commission of the broker or agency that assists you with the house purchase. Its value is 2% of the property price + 5% VAT. It is independent of the conveyance fee, although both are paid to agents.
2. Ongoing Costs for Mortgage Holders in Dubai
Ongoing costs are the recurring expenses that buyers need to consider after purchasing a property, such as monthly mortgage payments, maintenance fees, insurance premiums, and utility bills. These ongoing costs are important for buyers to budget for as they represent the regular financial obligations associated with owning and maintaining a property in Dubai.
2.1. Monthly Mortgage Payment: Regular Repayments
The mortgage is paid monthly, and the amount varies based on the required loan amount, the chosen interest rate, the loan term, and the buyer's profile.
2.2 Maintenance Fee: Sustaining the Property and Community
Usually paid monthly, the maintenance fee represents the costs associated with the building or community where the property is located. The cost varies depending on the facilities and amenities provided by the community. For example, if you purchase a house with a swimming pool, the expense is likely to be higher than if you buy a house without one.
2.3 Insurances: Protecting Your Investment
2.3.1 Life Insurance: Mandatory Coverage for Mortgage Holders
Life insurance is paid annually and is mandatory for anyone purchasing a house in Dubai with a mortgage. The cost ranges between 0.4% and 0.8% of the remaining loan amount, depending on the bank and the loan.
2.3.2 Property Insurance: Optional Protection for Property Owners
Property insurance is not compulsory in Dubai, but it is recommended to have coverage. The price is approximately 1,000 AED per year.
2.4 DEWA, Gas, AC, Internet: Utility and Communication Expenses
These expenses refer to the costs of water, electricity, air conditioning, and internet. DEWA stands for Dubai Electricity and Water Authority, the company responsible for managing the water and electricity supply in Dubai. Prices vary depending on providers and the required quantity or capacity.
By understanding the costs involved in buying a property in Dubai with a mortgage, you can plan your finances more effectively and make informed decisions.