When you plan to buy a real estate property in Dubai, UAE, you should consider the fact that the total costs of the entire object (house, apartment, cottage, etc.) consists not only of the price of this object itself, but also from various associated costs, which in total can become a significant part of the total amount. Therefore when planning such a purchase, they must be taken into account.
So, for example, the average total cost of buying a house with a mortgage is up to 130% of the price of the object itself. Besides, when purchasing a home on a mortgage loan, you must pay an upfront fee of approximately 25-30% percent of the total value of your property; your bank provides the rest of the amount as collateral.
Besides, the total amount involves solicitors and conveyancing fees, loan processing fees, property valuation fees,etc. These are the fees for the Dubai Land Department, mortgage registration fees, real estate registration fees, real estate agent fees, and other legal/lawyer fees associated with buying and selling apartments. All this in total, can make up to 7-10 percent of the total object price. Therefore, before starting the purchase procedure, you have to understand what this process is like and what you may encounter to save yourself from unpleasant surprises during the transaction. You can get the information on purchasing a house in Dubai at the official Dubai Land Department website (for Dubai) and Abu Dhabi official portal (for Abu Dhabi).
So, let's look at some typical options for buying a house in Dubai, with the price of AED 1, 3 and 5 million (270,000, 810,000 and 1,350,000 USD correspondingly) and compare the additional charges associated with each purchase.
Some examples of calculating the initial buying price
- Option No. 1: The cost of the object is AED 1 million (appr. USD 270,000). In this case, if a buyer wants to apply for a mortgage, then this person has to make the initial payment of 25% of the total cost (in our case, AED 250,000 or USD 67,500). Besides, the additional costs for completing all registration procedures, in this case, is around 10% of the total price – AED 100,000 (USD 27,000). Thus, you should save the initial amount of AED 350,000 (USD 94,000). One of the ways to accumulate such an amount is to save AED 48,000 (USD 12,960) a year over the next seven years (the collection period can be reduced by increasing the annual amount of savings).
- Option No. 2: The cost of the object is AED 3 million (USD 810,000). So, here is the second option – the price of the house is AED 3 million (USD 810,000). The advance payment is 25% of the total cost, that is, AED 750,000 (USD 202,500), is also be required, additional fees are also 10% of the total cost. Thus, to make a purchase, you need an initial capital of AED 1.05 million (271,000 USD). In case you save about AED 180,000 (USD 48,600) a year over the next five to six years, then by the end of this period, you would have the required amount.
- Option No. 3: The cost of the object is AED 5 million. Under the same starting conditions (advance payment – 25% and additional charges – 10% of the total cost), you need at least AED 1.75 million or USD 472,000 (AED 1.25 million or USD 337,500 for the initial payment and AED 500,000 or USD 135,000 for extra fees). Accordingly, if you save AED 250,000 per year for the next six years, by the end of this period, you would have the required starting amount.
What else to consider when planning a home purchase in Dubai?
Here is another crucial point for future homeowner in the UAE. A person should be ready to bear all the necessary expenses for maintaining a house, for repairs, etc. If you consider a mortgage loan as a tool for such an investment, it is essential to plan everything. If you don’t do this, you risk getting into a severe financial condition. In the examples discussed above, we proposed a cash-saving scheme, but other options can be considered as well: for example, savings in a local bank with an interest rate or an investment project. This can shorten the period of savings. Besides, it is crucial to consider factors such as potential risks and flexibility of the solution. All this will help you choose the best option for yourself.
For the correct calculation and selection of the optimal solution, you will need specific knowledge in this matter. If you do not want to analyze this by yourself, you can use the services of a professional consulting company.
Purchase of residential property in Dubai with the price of more than AED 1 million (USD 271,000) provides a foreigner with the right to obtain a resident visa (one of three possible ways to achieve this document). Here you can read more about how to get the Residency Visa In Dubai, UAE Through A Property Purchase. If you have questions regarding the purchase of real estate in the UAE and obtaining a residence visa, you can consult with our specialists through the contact form, or you can request a callback.
What extra fees do buyers have to pay to buy a flat in the UAE?
When buying a property in Dubai, the UAE, a buyer, in addition to the cost of the ownership itself, will have to pay additional solicitors and conveyancing fees, a fee for applying for a loan, a property appraisal fee, this is the fee for the Dubai Land Department, mortgage registration fees, real estate registration fees, real estate agent service fee.
What bills come when owning a house in the UAE?
On average, a person consumes about 20 thousand kilowatt-hours per year and almost 130 gallons of water in the UAE. The maintenance fee includes the costs of guarding, cleaning common areas, garbage removal, maintaining infrastructure (parking, swimming pools, gyms, and recreation areas), etc. As a rule, such payments are charged annually and for Dubai are, they are somewhere in between from 70 to 300 dirhams per square meters per year.
Who pays closing costs when buying a house?
Fees, commonly referred to as closing costs, are charged to both the buyer and seller equally.