The owner of property in Dubai who has an outstanding mortgage loan and plans to sell the real estate before returning to their home country needs to know the relevant rules. The question arises whether the buyer can take over the remaining mortgage debt, if bank approval is required, and what the legal procedure is for transferring ownership and settling or transferring the loan.
According to Dubai legislation, since the property is located in Dubai, the Dubai Mortgage Law applies. The seller (mortgagor) is permitted to sell, gift, or otherwise dispose of the mortgaged property, or create any rights on it, only upon obtaining the consent of the mortgagee and provided that the buyer agrees to assume all the seller's obligations under the mortgage agreement. The mortgagee also has the right to stipulate that the seller and buyer will jointly be responsible for these obligations. This corresponds to Article 10 of Dubai Law No. 14 of 2008 on Mortgages in the Emirate of Dubai.
There are two main options available to consider.
Option 1: Selling the Property by Settling the Existing Mortgage
The property can be sold, and the proceeds used to fully repay the existing mortgage loan. The general sequence of practical steps is as follows:
- Obtain a Letter of Obligation from the Bank: It is necessary to request a document confirming the outstanding loan amount and the required amount to close the mortgage, including any applicable early repayment fees or other payments.
- Agree on Sale Terms: A sales contract is concluded with the buyer, taking into account the existence of the mortgage, and the repayment of the loan amount is arranged.
- Registration of the Transaction with the Dubai Land Department (DLD): DLD provides a service called 'Registration of Sale of Mortgaged Property'. Under this service, the seller and buyer visit the Real Estate Registration Centre office with the necessary documents. The transaction is first registered to protect the interests of both parties while the mortgage repayment process is underway.
- Repayment of the Outstanding Loan: The DLD procedure involves the use of manager's cheques, including a cheque in favor of the bank for the debt amount and a cheque in favor of the seller for the remaining sale amount, if any. After this, a letter from the bank confirming the release of the mortgage is obtained.
- Completion of Ownership Transfer: After the DLD provides the mortgage release letter, it finalizes the registration procedures for the sale and the removal of the mortgage. If the buyer is obtaining a new mortgage, the corresponding financing and mortgage registration procedures must be completed.
This procedure is particularly relevant if the buyer pays for the purchase with their own funds or receives separate financing, and the seller's existing loan is settled using the sale proceeds. Exact documents and payment terms should be agreed upon with the bank and the Real Estate Registration Centre before completing the transaction.
Option 2: Transferring Existing Mortgage Obligations to the Buyer
Alternatively, permission can be requested from the bank for the buyer to assume the current mortgage obligations, if they are willing. In this case, you must approach the bank with a proposal for the deal and request confirmation on whether the buyer can take over the existing loan. The bank may assess the buyer's financial situation and require updated or replacement financing documentation. Any transfer of ownership and associated mortgage obligations must be documented and registered in accordance with bank approval and DLD requirements.
Based on the above provisions and procedures, the possibility of selling the property before returning home can be considered. The most suitable path will depend on whether the bank allows the buyer to assume the existing loan or requires the loan to be repaid using the sale proceeds. Written confirmation from the bank regarding the proposed procedure should be obtained, and actions should be coordinated with the DLD or the Real Estate Registration Centre to finalize the transaction.
For further clarification, it is recommended to contact your mortgage lender and the DLD.
Applicable Provision: Dubai Law No. 14 of 2008 on Mortgages in the Emirate of Dubai.