How to Buy a Mortgaged Property in UAE

If a property has an outstanding home loan, then it is considered a mortgaged property. There are multiple benefits of investing in a house in the UAE that is currently on a mortgage. For instance, the buyer will be receiving a ready-to-go house with well-equipped amenities situated at an established location. 

Another advantage is that as a buyer you won’t have to worry about dealing with an agent or sales team, instead, you can directly contact the individual seller of the property. However, you need to remember that a mortgage loan in UAE is different from purchasing a mortgaged property.

A lot of time buyers don’t have much clarity on the property and end up facing common problems. In this article, we will provide you with tips and tricks that will help you in buying a mortgaged property with the help of a mortgage loan.

How Purchasing a Mortgaged Property Can Help Both the Buyers and Sellers?

Let us understand this with an example. Suppose Tom has purchased a 3-bedroom apartment for AED 1.5 million in Dubai. The individual named Alex who has recently sold the apartment to Tom has to repay AED 50,000 as the outstanding amount. Tom has paid a down payment of AED 75,000 with which Alex will reimburse the outstanding loan amount.

With the help of this deal, Alex will be able to release the property documents from the bank while Tom will be able to complete the property registration using his name. He will also be able to get a mortgage loan in Dubai for the rest of the due amount. In this case, Tom has been successfully able to purchase the mortgaged property for himself while Alex got the money with which he will be able to reimburse the outstanding loan amount.

How Can You Sell or Purchase a Mortgaged Property in the UAE?

In the United Arab Emirates, you are allowed to purchase or sell a mortgaged property but the process of this deal or transaction is different. It will take some extra effort from you nonetheless; your efforts will be worth it. If you require the help of an expert, you can contact us while applying for a mortgage loan in UAE.

If you are the owner of a mortgaged property, then you should try to lower the loan amount by yourself as much as you can because it will help you attract more potential buyers for your property. Moreover, if the loan amount of your property is significantly high then the buyer would either ask you to lower the price during the negotiation process or they will request a discount.

After the buyer has been confirmed and a Memorandum of Understanding (Form F) has been signed by both parties, the seller will follow the steps mentioned below:

1. Ask for a letter of liability from the bank or lender

The seller will request a liability letter from its bank or lender in which the outstanding loan amount of the property will be mentioned.

2. NOC request from the developer

For the next step, the seller will have to appeal for a No Objection Certificate or NOC from the property developer. With NOC it will be confirmed that the seller or the buyer won’t have to pay any supplementary charges to the developer of the property.

3. Property blocking

Property blocking is a process which needs to be completed before the buyer completely pays off the seller’s mortgage loan in UAE. With this, the buyer will pay the outstanding loan amount of the seller while the property will be ensured in the buyer's name.

For blocking a property, the following documents need to be submitted:

• Liability letter from the bank or lender
• NOC from the developer
• A cheque to the seller (mentioning the purchase amount)
• MOU (Form F)
• Cheque payable to the bank with the outstanding amount
• Title deed copy
• Emirates ID, original passport, visa of both buyer and seller
• Original title deed with a clearance letter

4. Transferring the ownership of the property to the buyer

To transfer the ownership of the mortgaged property, both the buyer and seller will be required to visit the registration trustee’s office located in their respective regions. The existing mortgage of the seller will be released whereas another title deed will be issued in the name of the buyer.

The following documents need to be submitted to release the seller’s mortgage:

• A mortgage release letter from the lender or the bank
• Original title deed 
• Visa, passport and Emirates ID of both parties
• Mortgage loan approval letter from the buyer’s bank

Furthermore, the property blocking process will be skipped if the buyer has taken a mortgage loan. In this scenario, the original title deed will be directly transferred to the buyer’s bank after the seller’s bank clears up the mortgage.

Home Loan Vs Loan Against Property in UAE

Different Types of Charges You Have to Pay for Selling Mortgaged Properties in UAE

1. Early settlement fee

If you are paying off your mortgage earlier than the predetermined period, then as a seller of the property you will have to pay an early settlement fee in UAE. For a mortgage loan in Dubai, the early settlement fee is AED 10,000 or 1 per cent of the outstanding mortgage amount (whichever is considered less).

2. Blocking charges

Before the buyer or their bank clears the mortgage, the seller will have to pay the blocking charges. 

3. Mortgage release fee

Along with the above-mentioned charges, a mortgage release fee also needs to be paid to release the mortgage of the seller.

4. NOC fee

The NOC or No Objection Certificate fee is purely dependent on the developer of the property but VAT is also included in the NOC.

How to Buy A House in UAE - Step by Step Guide

To conclude

If you are willing to purchase a mortgaged property in UAE through a mortgage loan, then there is no need to worry because through us you will be easily able to receive a mortgage loan in UAE in no time. Furthermore, we can provide you with multiple types of mortgage loans so that you can choose the best mortgage loan for you.