According to the regulations of the UAE Central Bank, funds designated for the down payment when purchasing property must come from the buyer's own resources and not from other sources of borrowing, including credit cards or personal loans.
The UAE Central Bank explicitly stated in its Resolution No. 96/By Circulation/2019 Amending Circular No. 31/2013 that the down payment level must be covered by the borrower's own funds. This requirement is aimed at ensuring that the borrower has a proper financial interest in the mortgaged property.
Definition of Down Payment
Under the same Resolution No. 96/By Circulation/2019 Amending Circular No. 31/2013, clause 1 (5) defines the down payment as 'a one-time payment from the buyer for part of the purchase price that reduces the amount of the real estate loan.'
Consequently, if a buyer obtains mortgage financing to acquire property, the portion of the purchase price they are obliged to pay as a down payment cannot be obtained through a personal loan or credit card. The regulatory framework requires this contribution to be secured by the buyer's own funds.
It is important to note that this does not mean a general ban on obtaining personal loans. The Central Bank's regulation separately permits licensed banks and financial companies to provide personal loans to individuals, provided that relevant compliance, repayment, and debt burden requirements are met. A personal loan is defined as a loan repayable from salary, end-of-service benefits, and/or other verifiable regular income from a clearly defined source.
Thus, although obtaining a personal loan itself is not prohibited, using funds from such a loan to cover a mortgage down payment violates the Central Bank's requirements for issuing mortgage loans.
Maximum LTV Ratios
Furthermore, Article 3 (2) (B) of Resolution No. 96/By Circulation/2019 Amending Circular No. 31/2013 establishes the maximum Loan-to-Value (LTV) ratio as follows: for expats purchasing a first home/residence, the maximum LTV is 80% of the property value if its value is less than 5 million dirhams, and 70% if the value exceeds 5 million dirhams. For a second or subsequent home or investment property, the maximum LTV is 60% of the value, regardless of its size.
Overall, regulatory norms also prescribe maximum LTV ratios. For example, for an expat buying a first home for residence, the maximum LTV is 80% for property valued up to 5 million dirhams and 70% for property valued over 5 million dirhams. The acquisition of a second or subsequent home or investment property is limited to a maximum LTV of 60% of the value, regardless of its worth. Accordingly, the buyer will generally have to cover the remaining portion from their own funds, depending on specific circumstances and the lender's assessment.
In the case of purchasing off-plan property, the maximum LTV is 50% of the property value, regardless of the purpose of purchase, its value, or the buyer's category. This corresponds to Article 3 (2) (C) of Resolution No. 96/By Circulation/2019 Amending Circular No. 31/2013, which states that for all categories purchasing off-plan property, the maximum LTV is 50% due to the long-term nature of the development process and higher project completion risk.
In accordance with this legal provision, the buyer will not be able to take the amount needed for the mortgage down payment through a separate personal loan, according to the Central Bank's requirements for mortgage lending.