Dubai: Buy Property in Cash or on Credit?

The number of young professionals in Dubai looking to settle for an extended period is increasing, and consequently, the demand for housing is growing along with prices and mortgage loans.

Moreover, rising rental costs are pushing many tenants to consider buying their own homes as renting becomes less economical. As a result, many buyers are opting for mortgages on their journey to becoming proud property owners.

According to Mortgage Finder, from January to August 2023, the volume of loans issued increased by 24%, and their value rose by 22%. In the first half of the year, mortgage sales transactions accounted for 38% of all real estate deals.

What is a Mortgage Rate?

In the past two years, mortgage rates have risen in line with interest rate hikes by the UAE Central Bank and the US Federal Reserve. Currently, rates range from 4.24% to 4.99% for most local banks.

When choosing the best mortgage option, it's not just about the rates. Some banks charge fees that can make a product with a lower rate more expensive depending on the buyer's circumstances. Therefore, it's recommended to speak with a mortgage consultant who has comprehensive information and access to all products and can help choose the most suitable mortgage tailored to your specific needs.

Cash or Mortgage?

Many buyers are reluctant to invest all their savings in real estate and prefer to keep some liquid cash on hand. Such individuals find taking out a mortgage beneficial, while others think the opposite. Overall, if a buyer's situation allows for using cash, this option is more advantageous as it avoids interest payments.

One can explore offset mortgage products that allow consumers to place savings in a special account, which in turn offsets mortgage interest but also allows for deposits and withdrawals at any time. To determine which option is better, it's always wise to consult an experienced mortgage specialist who can effectively assist in making the most informed and suitable decision.

Analysts still expect interest rates to drop next year in the US, so mortgage rates are likely to decrease in the UAE as well. Therefore, for UAE property buyers looking to secure a mortgage soon, it's more beneficial to opt for floating rates as this will lead to lower rates in the future.