Understanding the Latest Changes in Mortgage Fee Financing 2025
Understanding the New UAE Banking Legislation: Impact on Fee Financing for Homebuyers
In a significant move for the real estate market, recent reports indicate that the UAE Central Bank has issued directives to banks, instructing them to cease fee financing, including Dubai Land Department (DLD) and agency fees within mortgage financing. This change means that buyers are now required to cover these fees entirely out of pocket, in addition to the standard down payment.
Let’s explore what this directive means and use a practical example to understand its impact.
What Has Changed?
Previously, many banks in the UAE offered financing options that allowed buyers to finance up to 80% of the associated fees, such as the Dubai Land Department (DLD) fees, agency fees, and other related costs. Buyers could take comfort in knowing that these upfront costs were partially covered by their mortgage package.
However, with the new directive, banks are no longer allowed to finance these fees. Buyers must now pay the full amount of the fees out of pocket, increasing the upfront financial requirement to complete a property purchase.
Breaking Down the Costs for a AED 3 Million Property
Let’s consider the purchase of a property worth AED 3 million to understand the practical implications of this change:
Before the Directive
Property Price: AED 3,000,000
DLD Fees (4%): AED 120,000
Agency Fees (2%): AED 60,000
Mortgage Registration Fee (0.25%): AED 7,500
Other Miscellaneous Fees: ~AED 10,000
Total Fees: AED 197,500
In the previous system, banks could finance up to 80% of the fees, meaning buyers only needed to pay 20% of the fees upfront:
Bank-Financed Fees (80%): AED 158,000
Upfront Fees (20%): AED 39,500
Down Payment (20% of Property Price): AED 600,000
Total Upfront Cost: AED 639,500
After the Directive
Now, buyers must cover the full fees themselves in addition to the 20% down payment:
Property Price: AED 3,000,000
Down Payment (20%): AED 600,000
Fees (to be paid upfront): AED 197,500
Total Upfront Cost: AED 797,500
What Does This Mean for Buyers?
The new directive raises the barrier to entry for many potential homeowners, as they must now prepare to pay a significantly larger upfront amount. This may particularly impact first-time buyers who might not have enough liquid savings to cover both the down payment and associated fees.
The UAE government’s new directive is a step towards fostering financial stability in the real estate market. At Amaya & Co, we’re here to guide you through these changes and help you make informed decisions about your property investments.
If you have any questions or need assistance with your real estate journey, don’t hesitate to reach out to our team of experts. Together, we can navigate this evolving market landscape and find the perfect property for you.