Financing options at a glance
When buying property in Dubai, you have the following financing options as a foreign buyer:
1. A bank mortgage in Dubai: maximum 50% LTV for non-residents, at 3.89–6.5% variable interest 2. A developer payment plan: for off-plan projects, interest-free, spread over the construction period and sometimes even post-handover 3. Buying entirely from your own funds: the fastest and simplest option 4. Refinancing existing property in Europe: increasing the mortgage on your home 5. Purchase through a company: an LLC or free zone company in the UAE, with possible corporate financing
Each option has advantages and disadvantages that depend on your personal financial situation, tax position and investment strategy. Augusta Properties helps you select the optimal financing structure.
Developer payment plans
The most attractive financing option for off-plan purchases is the developer payment plan. These are interest-free plans that spread payment over the construction period and sometimes the post-handover period.
Typical payment plan structures:
60/40 plan: • 60% during construction (in instalments of 10%) • 40% at handover
40/60 plan (post-handover): • 40% during construction • 60% after handover, spread over 2–3 years
20/80 plan (aggressive post-handover): • 20% during construction (just 10% at reservation + 10% during construction) • 80% after handover, spread over 3–5 years
1%-per-month plan: • 10–20% at reservation • 1% per month for the remainder of the construction period
These plans are interest-free and require no bank approval, proof of income or credit check. They are especially popular with international buyers who want to deploy their capital in stages.
Importantly, if an instalment goes unpaid, the developer can terminate the contract and retain part of the amounts already paid (usually 30–40% as a penalty). Make sure you can meet the payment obligations.
Bank mortgage: the full process
If you opt for a bank mortgage in Dubai, the process runs as follows:
1. Apply for pre-approval: submit your documents to one or more banks. Within 3–5 business days you receive an indication of the maximum loan amount and the conditions.
2. Select a property: with the pre-approval you can search purposefully for property within your budget.
3. Sign the MOU: after selecting the property, you sign the MOU stating that the purchase is subject to mortgage approval.
4. Formal application: the bank starts the formal assessment and commissions a valuation report.
5. Final offer letter: the bank makes a definitive offer setting out all conditions, interest and costs.
6. Acceptance and signing: you accept the offer and sign the mortgage documents.
7. Disbursement: on the day of the transfer of ownership, the bank pays the mortgage amount to the seller via the trustee office.
The total lead time from pre-approval to disbursement is 3–6 weeks. Augusta Properties works with mortgage advisers who coordinate the process for you and negotiate the best rates.
Purchase through a company
Some buyers choose to acquire property in Dubai through a company rather than in a personal capacity. This can offer advantages:
• A UAE LLC or free zone company: property held in the name of a Dubai company can offer tax advantages and simplify the transfer on sale or inheritance • Holding through a foreign company: in some cases a holding company in another jurisdiction is used, although stricter international regulation is making this less common
Key considerations: • A company in Dubai costs AED 15,000–50,000 per year in licence and administration fees • The DLD fee on a purchase in a company's name is identical (4%) • Not all mortgage lenders finance property held in a company's name • On a sale of the property via a share transfer rather than a property transaction, the DLD fee can be avoided, but this requires legal advice
We always recommend obtaining professional tax and legal advice before deciding to buy property through a company. Augusta Properties can put you in touch with specialised advisers.
Combining financing with letting
Many buyers finance their Dubai property partly with a mortgage and cover the monthly payments with rental income. This is a proven strategy, provided you run the numbers correctly.
Example calculation: • Home: AED 2,000,000 • Mortgage (50% LTV): AED 1,000,000 • Interest: 5% variable, 25 years • Monthly payment: approx. AED 5,850 • Expected annual rent: AED 120,000 (6% gross yield) • Monthly rent: AED 10,000 • Service charges: AED 1,500/month • Net rent after costs: approx. AED 8,500/month • Cash flow after the mortgage: +AED 2,650/month positive
In this example, the property generates a positive cash flow despite the mortgage. The tenant effectively pays off a large part of your mortgage while you benefit from capital appreciation.
Note that rental income fluctuates and there are periods of vacancy. We recommend holding a buffer of at least 3–6 months of mortgage payments.
Tips for international buyers
Specific financing tips for buyers from abroad:
• Compare the costs of a Dubai mortgage with increasing the mortgage on your home in Europe. European interest rates are generally lower, but there are legal and tax complications • Allow for exchange-rate risk: your rental income is in AED (pegged to the USD), while your income may be in euros. A weakening euro means a higher euro value for your property and rental income • With a developer payment plan, you can often transfer instalments directly from Europe. You do not need to open a bank account in Dubai for this • Consider a combination: a payment plan during construction, and a mortgage for the remaining amount at handover. This combines the advantages of both options • Keep all payment records carefully for the tax return in your home country
Augusta Properties advises you free of charge on the optimal financing structure. Contact us for a personal financing plan.