In the dynamic and ever-growing real estate market of Dubai, buyers are often faced with the crucial decision of how to finance their property purchase. Two popular options are the 1% monthly installment plan in Dubai and traditional mortgage deals. Each has its own set of advantages and disadvantages, making the choice largely dependent on individual circumstances and financial goals. This blog will delve into the specifics of both Dubai property financing options and analyze which is the best option for you.
The 1 percent payment plan Dubai is an attractive financing option offered by several developers in Dubai. Under this plan, buyers pay 1% of the property's value every month over a specified period, typically extending until the completion and handover of the property. It is one of Dubai real estate’s most flexible payment plans. There are various properties available with a 1 percent payment plan, including Park Greens, Views by Danube, and Morocco at DAMAC Lagoons.
Here is a sample 1% payment plan in Dubai:
Payment Schedule | Percentage | Description |
Booking | 5% | Initial down payment |
1 Month from Booking | 1% | First installment |
2 Months from Booking | 1% | Second installment |
3 Months from Booking | 1% | Third installment |
4 Months from Booking | 1% | Fourth installment |
5 Months from Booking | 1% | Fifth installment |
6 Months from Booking | 1% | Sixth installment |
7 Months from Booking | 1% | Seventh installment |
8 Months from Booking | 1% | Eighth installment |
9 Months from Booking | 1% | Ninth installment |
10 Months from Booking | 1% | Tenth installment |
11 Months from Booking | 1% | Eleventh installment |
12 Months from Booking | 1% | Twelfth installment |
Upon Completion (Handover) | 70% | Final payment upon property handover |
This table illustrates a typical 1% payment plan structure, where small monthly payments are made until the project's completion, with a substantial final payment due upon handover. The exact percentages and timeline can vary depending on the developer and specific project.
What is a mortgage deal? A mortgage deal involves borrowing money from a bank or financial institution to finance the purchase of a property. The buyer repays the loan over a fixed term, with interest. You can also compare the mortgage process with cash payments for buying a home in Dubai.
When comparing the 1% payment plan to traditional mortgages, one of the most significant differences lies in the initial financial burden on the buyer. The 1% payment plan for purchasing off plan properties typically requires much lower initial outlays, allowing buyers to pay a small percentage of the total price monthly, which can be particularly attractive for those without the immediate means for a hefty down payment. In contrast, traditional mortgages usually require a down payment ranging from 5% to 20% of the property’s price upfront, which directly contributes to building equity in the property. This aspect of mortgages is beneficial for buyers looking to increase their net worth over time.
With a mortgage, buyers can own the property immediately upon completion of the purchase process, which means they can start benefiting from capital appreciation and use the property as they see fit. While, in a 1% payment plan, ownership is typically transferred only after a significant portion of the payment has been made, often at the end of the payment schedule.
Another key difference is the structuring of payment schedules and financial planning. The 1% payment plan offers a straightforward approach without the extensive approval processes required for mortgages. In the UAE, the mortgage or home loan approval process is governed by specific criteria set by banks. These requirements for potential borrowers include a minimum salary threshold, employment status, and tenure, as well as necessary documentation such as a residency visa and Emirates ID.
Choosing between a 1% payment plan and a mortgage deal depends on several factors:
Both the 1% payment plan and mortgage deals have their own sets of benefits and drawbacks. It’s crucial to understand the difference between a mortgage vs payment plan and carefully evaluate your financial situation, long-term goals, and the prevailing market conditions before making a decision. Consulting with a financial advisor or real estate expert can also provide personalized insights to guide you toward the best financing option for your Dubai property purchase.
In Dubai, the maximum mortgage cap is set at 85% of the property's value for residents, 80% for expatriates, and ranges from 50% to 80% for non-residents.
Yes, you can buy a property on a mortgage in Dubai and rent it out. To rent a property in Dubai, you can list your property on Provident to find suitable tenants.
Mortgages might be preferable for long-term investments as they generally come with the benefit of property equity growth. The 1% payment plan can be appealing for shorter-term holding strategies or for those who plan to upgrade or change properties frequently.
Insight: Mortgages might be preferable for long-term investments as they generally come with the benefit of property equity growth. The 1% payment plan can be appealing for shorter-term holding strategies or for those who plan to upgrade or change properties frequently.
For more information, get in touch with us at Provident