Off-plan mortgage in Dubai: what banks will finance

Developers in Dubai sell many new homes before they are built, on payment plans spread over the construction period. Financing one of these is different from financing a ready home, and the difference is mostly about timing. Much of the money is due before a bank will lend anything.

The 50% cap during construction

The Central Bank caps lending on property under construction at 50% of its value. That applies to every buyer, UAE nationals included.

Banks also only finance off-plan units in projects they have approved, and most lend only once construction is well advanced or at handover. Each bank keeps its own list. A project approved at one bank may not be on the list at another, which is why we check with several of the 20+ banks we work with before you commit.

When a bank does lend during construction, it usually pays the developer in stages as the building goes up, rather than in one amount.

On a AED 1,600,000 off-plan apartment, the most any bank can lend before completion is AED 800,000. The other AED 800,000, plus the fees, comes from you.

How payment plans work

Most buyers do not borrow during construction at all. They pay the developer's plan in cash and take a mortgage when the unit is finished.

Here is an example of a 60/40 plan on the same AED 1,600,000 apartment, with 60% paid during construction and 40% at handover:

Stage	Basis	Amount (AED)
Down payment at booking	20% of the price	320,000
DLD fee at Oqood registration	4% of the price	64,000
Instalments during construction	40% of the price	640,000
Paid in cash before handover		1,024,000
Balance due at handover	40% of the price	640,000

Plans vary a lot between developers and projects, so treat this as an illustration of the shape rather than a typical schedule.

The DLD fee comes early. The sale is registered on Oqood, the Land Department's register for off-plan sales, shortly after you sign, and the 4% transfer fee is paid then. Some developers run promotions that cover part or all of it. Read the terms, because the cost is sometimes built into the price.

Your instalments go into the project's escrow account, which is regulated by the Dubai Land Department. The developer draws on it as construction progresses.

The handover mortgage

When the building is complete, the developer sends a handover notice with the balance due. This is when most buyers take their mortgage, usually called a handover mortgage.

By then the property is finished, so most banks assess it as a ready unit and the normal caps apply. For a resident expat buying a first home under AED 5 million, that means up to 80% of the value. In the example above the buyer only needs AED 640,000, which is 40% of the price, so the cap is not an issue.

The bank still values the unit and lends on the lower of the price and the valuation. That matters if your plan leaves a large balance at handover. Say you bought at AED 1,600,000 on a 20/80 plan, so AED 1,280,000 is due on completion, and the bank values the unit at AED 1,500,000. The most it can lend is 80% of the valuation, AED 1,200,000, and you need to find the other AED 80,000 in cash.

For the AED 640,000 loan in the main example, the costs at handover are:

• Mortgage registration: 0.25% of AED 640,000 plus about AED 290, so about AED 1,890
• Bank valuation: AED 2,500 to 3,500 plus VAT
• Arrangement fee: up to 1% of the loan plus VAT, so up to AED 6,720, unless the bank waives it

The developer will usually also ask for service charges in advance before it releases the keys. Banks require life insurance on the borrower and property insurance on the home, which they often arrange and add to the monthly payment.

Timing the application

Pre-approval is typically valid for 60 to 90 days. Handover dates can slip, and applying too early can mean your pre-approval runs out before the unit is ready. Start the application once the developer gives a firm completion date or sends the handover notice.

A lot can change during construction. Your job or debts may be different, and you are older, which affects the term. A buyer who signs at 50 and receives the keys at 53 can take a mortgage of 12 years at most, finishing at 65. The monthly payment on the handover balance will be higher than it would have been over a longer term, and it still has to fit inside the 50% debt burden limit.

Plans that run past handover

Some developers let you pay part of the price after handover, in instalments direct to them. These post-handover plans reduce the cash needed at completion, but the amount still owed to the developer can affect how and when a bank lends to you. If you expect to need a mortgage later, talk to us before you sign one.

Buying off-plan on resale

You can also buy an off-plan unit from the original buyer before completion. Many developers only allow this once a minimum share of the price has been paid. You pay the seller what they have paid the developer, plus any premium, and take over the remaining instalments. Few banks finance at this stage, so plan for cash until handover.

Before you sign with a developer

Questions to ask yourself and the developer:

• Is the project on the approved list at the banks you are likely to use at handover?
• How much is due at handover, and will your income support a mortgage for that amount at that point?
• What happens if completion is late, and how would a delay affect your rent or other plans?
• If you live abroad, will any bank lend on this project to someone in your country? Our non-resident mortgage guide covers this.

For the full list of purchase fees, see the cost of buying property in Dubai. Our off-plan mortgage page has more on the products available.

If you already have a unit due for handover, send us the payment schedule and the expected completion date on WhatsApp at +971 52 871 6915 and we will tell you when to apply. To see the monthly payment on your handover balance, use the mortgage payment calculator.