News
April 18, 2025
Dubai’s Mortgage Shift: The Hidden Costs Buyers Can’t Ignore in 2025
Starting February 1, 2025, Dubai’s mortgage landscape has undergone a major regulatory shift that is reshaping how property buyers finance their homes. The Central Bank of the UAE has mandated that banks will no longer cover key transaction fees as part of mortgage financing. This change aligns Dubai with global real estate markets like the UK and USA but also brings new challenges and opportunities for buyers and investors.
What Has Changed?
Under the new rules, homebuyers must now pay the following fees upfront and out of pocket, rather than including them in their mortgage loan:
Dubai Land Department (DLD) Registration Fee: 4% of the property price
Real Estate Brokerage Commission: 2% of the property price
DLD Trustee Fee: AED 4,200
Mortgage Registration Fee: 0.25% of the loan amount
Title Deed Issuance Fee: AED 500
Previously, banks could finance up to 80% of these costs within the mortgage, allowing buyers to spread payments over the loan tenure. Now, these fees add an extra 6-7% of the property price to the buyer’s initial cash outlay, increasing the upfront financial burden significantly
Pros of the New Mortgage Rules
Promotes Responsible Lending: Buyers must demonstrate stronger financial capacity, reducing the risk of over-leveraging and defaults.
Market Stability: By increasing upfront costs, the policy aims to cool down rapid price growth and prevent market overheating.
Alignment with Global Standards: Dubai’s mortgage system now mirrors mature markets, enhancing investor confidence and transparency.
Boosts Off-Plan Property Demand: Developers offer flexible, long-term payment plans without brokerage fees, making off-plan properties more attractive.
Cons and Challenges
Higher Upfront Costs: Buyers need more liquid funds at purchase, which may limit affordability, especially for first-time buyers or those targeting the secondary market.
Potential Slowdown in Resale Market: Increased initial costs could reduce demand for ready properties, shifting interest toward off-plan projects.
Stricter Eligibility: Banks maintain stringent lending criteria, and the new rules may further restrict access to mortgages for some buyers.
Longer Financial Planning: Buyers must carefully budget for all upfront expenses, complicating the purchase process
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Impact on Buyer Behavior and Market Trends
The new mortgage rules are expected to:
Increase Demand for Off-Plan Properties: Flexible payment plans and lower upfront fees offered by developers make off-plan investments more appealing.
Encourage Financial Prudence: Buyers are likely to save more before purchasing, leading to more sustainable borrowing.
Shift Market Dynamics: Secondary market sales may slow, while off-plan projects could see a surge in transactions.
Influence Pricing: Developers might adjust prices or offer incentives to attract buyers facing higher upfront costs
Conclusion
Dubai’s 2025 mortgage regulatory changes mark a significant step toward a more stable and mature real estate market. While the increased upfront costs pose challenges for some buyers, the move encourages responsible lending and aligns Dubai with international standards. For investors, especially those eyeing off-plan properties, these changes open new opportunities through flexible payment plans and potentially more balanced market growth.
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