Dubai: The Central Bank of UAE has issued a new set of regulations on mortgage lending, defining the eligibility of various categories of borrowers based on the loan-to-value (LTV) ratio.
In the case of UAE nationals, each borrower can seek a loan on only one property under this category. For properties valued at Dh5 million and below, the loan eligibility will be a maximum of 80 per cent. In cases where the property value exceeds Dh5 million, bank financing (LTV) shall not exceed 70 per cent of the value of the property.
If UAE nationals seek loans for a second house or investment property, the loan eligibility is capped at 65 per cent of the value of the property.
In the case of expatriates, the central bank has set the mortgage limit for the first house (for owner occupier) at 75 per cent of the value for properties that are valued less than Dh5 million. If the value of the property is more than Dh5 million, an expatriate borrower can borrow a maximum of 65 per cent of the value of the property.
For a second house or investment property, expatriates will be eligible only for mortgage up to a maximum of 60 per cent of the value of the property.
Given the long-term nature of the development process and the higher level of risk to completion, the maximum LTV for mortgage on property being purchased offplan is set at 50 per cent, regardless of the purpose or category of the purchaser.
The maximum limit for a mortgage loan is set at 25 years and the maximum age for the borrower at the time of the last installment is set at 70 years for UAE nationals and 65 years for expatriates.
The central bank also specifies that the debt burden ratio (calculated in total monthly installments of all debt burden) should not exceed 50 per cent of the monthly income. In addition, the maximum financing amount allowed for UAE nationals is set at eight times their annual income and for expatriates at seven times their annual income.