UAE Banks Offer Equity Release to Lend to Homeowners

Banks in the UAE have begun targeting property owners as potential borrowers by offering packages whereby individuals can take a mortgage by using their existing property as collateral.

Last Updated on May 22, 2014 by Brian Habibi

There has been a lot of debate regarding the status of Dubai’s real estate market boom. Since last year, the UAE and Dubai governments have been taking measures to try to reduce the risk of another housing bubble in the city. This includes the increase of the land registration fee from 2% to 4% (click here to read more). While such measures may benefit the overall economy, they also increase the financial burden on buyers.

As a result, banks in the UAE have begun targeting existing homeowners as borrowers. Many banks are offering packages whereby a homeowner can take a mortgage by using their current property as collateral. What this means is that the bank lends to the customer an amount based on, and secured by, a property owned by the borrower. This type of mortgage is typically referred to as equity release financing.

Some banks in the UAE are offering loans of up to 70% of the property’s value at competitive interest rates. From the bank’s perspective, they have collateral from the borrower in the form of a completed property, and as a result, can offer favorable interest rates as the credit risk is reduced. From the borrower’s perspective, they can unlock the capital from their existing property to purchase a second one. This has become even more important after the UAE Central bank increased the down payment for a second property to 40%.

In order to qualify for equity release financing, the borrower should already have paid off most of the mortgage on their existing property. In addition, regulations concerning the individual’s debt burden ratio still apply.’s home loan application process allows you to input your existing debt and determine your eligibility based off the Debt Burden Ratio.

As the UAE continues to look for ways to tighten their control over the real estate and property market, banks are actively searching for new lending opportunities.

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