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Can You Get a Mortgage for Off-Plan in Dubai? Off-Plan Mortgage vs Post- Handover Payment Plan

Off Plan Mortgage Dubai

Considering an off plan property and want to understand more about the payment plan? How do you choose which one is right for you… Off-plan mortgage or post-payment plan?

Here, we will go through what you need to know about off-plan mortgages, types of payment plans and their pros and cons.

Can You Get a Mortgage for Off-Plan in Dubai?

Banks in Dubai allows expats buyers to finance a property with a minimum down payment of 20% on property valued at AED 5 million and 30% on property valued over AED 5 million. Off-plan will be at 50%.

For example, if the off-plan property value is AED 1 million, the minimum down payment is AED 500,000, and the rest can be mortgaged.

This means, buyer must have enough cash to cover at least 50% of the property value. If the buyer prefers not to put down 50% for an off-plan, there are other payment plans offered by the developers.

Keep in mind, banks have their conditions on which type of off-plan projects (typically Emaar Properties and Meraas) they want to finance, so not all off-plan projects can be mortgaged. 

What’s a 30 40 30 Payment Plan?

Remember, developers are always looking for ways to incentivise potential buyers, so let’s go through their payment types.

In Dubai, you will hear often popular off-plan payment terms: 80/20, 70/30, 60/40, 50/50, etc.

As the name suggests, the 80/20 payment plan requires buyers to pay 80% of the property value (in installments) before completion, and the remaining 20% in installments at handover, usually in 3 to 5 years.

If post-handover payment plans schedule looks like this: 30/40/30.

This means, the developer requires 30% of payment during construction, 40% at handover, and the remaining 30% (in 2 to 3 years after handover).

The number of payment installments and due dates really depends on the project’s construction timeline, and can vary from developer to developer.  

Here is an example of a payment plan for Eden The Valley project by Emaar. This project requires a 5% down payment, a total of 50% payment before construction completes, with the remaining to be paid in installments every 5 months within 2 years.

Eden The Valley by Emaar

Off Plan Mortgage

Off Plan Mortgage – Pros ✅Off Plan Mortgage – Cons  ❎
1. Can customize the loan
(fixed / variable rate, interest plus capital repayment, interest-only)
1. Extra fees to banks and third parties
(i.e. interest to bank, DLD mortgage fee 0.25% of loan, Mortgage application fees 1%, Property Insurance fee 0.5%, DLD Fee 4%)
2. Flexible Repayments – repay up to 25 years or until 65 years for salaried expats or until 70 years for UAE nationals and self-employed expats.2. Higher down payment (20%) compared to post payment (5%-10%)
3. Can cancel or renew the loan if your financial situation changes. Can be refinanced.3. Age limit – 21 to 65 years for salaried expats / until 70 years for UAE nationals and self-employed expats.

Off Plan Post-Handover Payment Plan

Post Handover Payment Plan – Pros ✅Post Handover Payment Plan – Cons  ❎
1. Investing early at lowest price, maximizing ROI1. Delayed completion time – need to continue renting elsewhere or delay renting it out
2. Developers often waive portion of DLD Fee 4% to incentivise buyers2. Developer go bankrupt / unable to complete – Lose all deposits completely
3. Lower upfront cost. Not required to pay any third-party fees or bank fees.
4. Pay 0% interest to developer
5. Lower down payment (5-10%) compared to mortgage plan (20%)
6. If buyers can’t qualify for a mortgage, post-payment is always available
7. More privacy. No background checks like the banks

The Bottom Line: Off Plan Mortgage or Payment Plan?

Not every off-plan investor is a cash buyer and not every off plan buyer qualifies for a mortgage in Dubai.

Post-payment plans may seem great on the surface but delays are very likely to happen and there are more financial risks than expected, so it’s important to do your due diligence and understand your risk and rewards.

Ultimately, the most important thing to do as a buyer is to:

1. Determine how much you can afford

2. Determine how much cash you feel comfortable locking down as a down payment

3. Understand the off-plan payment plans

4. Compare off-plan payment vs potential monthly mortgage payment

4. Determine how much cash you need to set aside for the installments or mortgage

5. Stick to your home payment budget

To read more: The 30% Rule & How to Find Out How Much You Can Afford

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