In Dubai, foreigners have the right to purchase a property only in specially designated areas only, which are called freehold. Local banks provide mortgage loans to expats. One can take a mortgage both for a completed and off-plan unit. The loan can be obtained for a period of up to 25 years, provided that the borrower does not reach the retirement age (65 years) before the completion of the loan repayment.
Average interest rates on a loan in the emirate are 3-5% per annum. Depending on the bank, interest can be charged at a fixed or floating rate. The lender retains the right to early repayment of the loan but in this case, a penalty of 1% will have to be paid.
Note! An application for a mortgage in Dubai will cost 1% of the property value, however, in case of refusal, this amount will be refunded.
It is better to take out a loan for a longer period. The longer the term, the lower the payment is; moreover it decreases the risk of facing negative market conditions and unfavorable refinancing conditions. Of course, the longer the loan term, the more interest you will have to pay to the bank, but even with an average loan rate of 3% per annum with a minimum yield of 4%, you will still remain in the black.
As for on-lending and refinancing, these options should be avoided. When issuing a mortgage, Dubai banks assess, among other things, the total loan burden of the borrower in relation to his assets. If the loan burden is too big then lenders can give a mortgage on less favorable terms (increased loan rates and a reduced loan amount).