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Dubai Islamic Bank (DIB) mortgage: full guide
A guide to Dubai Islamic Bank mortgage offers, including their terms/conditions, typical loan offers, and application process with required documents.
Overview of terms and conditions
Dubai Islamic Bank (DIB) was founded in 1975 and is the largest Islamic bank in the UAE in terms of assets (over 75 billion in group assets). DIB is also the world’s first full-service Islamic bank and the second largest Islamic bank in the world. They have over 500 branches across the Middle East, Asia, and Africa, providing Muslims and other buyers with real estate financing options. DIB is more than 70% publicly owned.
All of DIB’s real estate financing options are Islamic mortgages, meaning they’re compliant with Sharia’h law based on the teachings of the Holy Qur’an and the sayings of Prophet Muhammad. Under these laws, banks are forbidden from charging interest and must find alternative ways of making mortgages lawful and profitable.
DIB offers a variety of Islamic financing options for residential and commercial properties including:
Ijara
Forward Ijara
Murabaha
Ijara | Forward Ijara | Murabaha | |
|---|---|---|---|
What is it? | Bank purchases and leases the property to the customer for a variable rental payment for a certain period of time. | Bank finances under construction, off-plan, and properties nearing completion. Bank procures the construction under a purchase Istisna contract, and delivers the completed property to the customer under a forward lease structure. | Bank purchases the property and sells it to the customer for a fixed Murabaha sale price (property price + agreed profit) that is paid in installments according to an agreed schedule. Customer must sign a Promise to Purchase. |
What happens after? | After the leasing period, bank sells the property to the customer for a nominal value. | After property completion, bank converts the forward lease contract to normal Ijara. After the Ijara leasing period, bank sells the property to the customer for a nominal value. | Customer pays the agreed installments towards the Murabaha sale price. |
General terms / conditions | Bank owns the property during the financing period and is responsible for all ownership risks and rewards (but the property may still be registered in the customer’s name). | Same as Ijara. | Terms are outlined in Murabaha Sale contract. |
The following are the general terms and conditions that apply to all mortgage applicants:
Islamic loans only
Salary transfer not required (but different rates may apply)
Pre-approval fee: AED 1,575 (adjusted against total processing fee)
Bank valuation fee: AED 2,625
No additional bank arrangement fee for selected developers (DIB has one of the largest approved developer bases)
Partial settlement terms
1.05% penalty on all prepayments, capped at AED 10,500 (including VAT)
A late payment penalty is charged and donated to charity
Bank transfer fee - 1.05% penalty on the exceeding amount, capped at AED 10,500 (including VAT)
Mandatory in-house life insurance policy
0.36% per annum of the mortgage balance for a single life
0.72% per annum of the mortgage balance for joint life, if both incomes used for affordability
Mandatory building insurance: 0.03% of the property value per annum*
*Building insurance is not required for Forward Ijara loans while the property is still under construction (but life insurance is still required).
DIB has a special home financing option known as DIB MyHome that gives customers more flexibility in terms of their monthly installments and the ability to budget for extra expenses. In order to be eligible, customers must transfer their salary to DIB. Under DIB MyHome, borrowers have variable rate options where they can choose the review period for the EIBOR rates (either 3, 6, or 12-month review frequencies). They also have fixed-rate options with introductory fixed rates (from 3 to 5 years) with a choice of EIBOR review periods after the fixed-rate period.
Let’s look at Dubai Islamic Bank’s mortgage options for borrowers that are employed, self-employed, and non-residents. The rates given in the offers below were updated by DIB on January 2nd, 2023. The 3-month EIBOR rate is taken from the UAE Central Bank website and is current as of January 24th, 2023. EIBOR rates are updated on a daily basis and change with the market conditions.
Mortgages for employed borrowers
DIB has multiple financing options that are available to residents that are salaried employees. Customers that transfer their salary to a DIB account will be eligible for more favorable variable-rate offers.
Fixed-rate offers:
4.99% fixed for 1 year
5.25% fixed for 3 years
5.49% fixed for 5 years
Reversion rate:
Fixed margin of 1.75% for the remaining term + 4.665% (3-month EIBOR) = 6.415%
Minimum floor rate of 4.99% (fixed 1 year), 5.25% (fixed 3 years), and 5.49% (fixed 5 years)
Variable-rate offers with salary transfer:
1.248% fixed margin for the life of the loan + 4.665% (3-month EIBOR) = 5.913%
Up to 60% loan-to-value (LTV) ratio
1.498% fixed margin for the life of the loan + 4.665% (3-month EIBOR) = 6.163%
Above 60% LTV ratio
Variable-rate offers without salary transfer:
1.498% fixed margin for the life of the loan + 4.665% (3-month EIBOR) = 6.163%
Up to 60% LTV ratio
1.748% fixed margin for the life of the loan + 4.665% (3-month EIBOR) = 6.413%
Above 60% LTV ratio
Other conditions/terms/fees for employed borrowers:
Down payment from:
15% for nationals
20% for expats
No bank processing fee
Service fee: AED 5,250
Mortgages for self-employed borrowers
Self-employed borrowers are eligible for the same fixed-rate offers as salaried borrowers (with the same reversion rates and floor rates). On the other hand, they have higher rates when it comes to variable-rate mortgages.
Variable-rate offers:
1.748% fixed margin for the life of the loan + 4.665% (3-month EIBOR) = 6.413%
Up to 60% LTV ratio
1.998% fixed margin for the life of the loan + 4.665% (3-month EIBOR) = 6.663%
Above 60% LTV ratio
Other conditions/terms/fees for self-employed borrowers:
Down payment from:
15% for nationals
20% for expats
Business financials required
No bank processing fee
Service fee: AED 5,250
Mortgages for non-resident borrowers
DIB has financing options for non-residents looking to buy a new property or capitalize on their existing
home equity. These offers are for all non-residents, even those residing in other Gulf Cooperation Council (GCC) countries like Saudi Arabia, Kuwait, Qatar, Bahrain, and Oman. In general, they provide non-residents with Ijarah financing offers for completed properties.
Variable-rate offers:
Salaried clients:
2.838% margin for the life of the loan + 4.665% (3-month EIBOR) = 7.503%
Self-employed clients:
4.588% margin for the life of the loan + 4.665% (3-month EIBOR) = 9.253%
Other conditions/terms/fees for non-resident borrowers:
Down payment from 25%
1% of loan amount bank processing fee
Bank arrangement fee: AED 1,500
Service fee: AED 7,500
Commercial mortgages
DIB also provides financing for commercial property purchases, including retail spaces, office spaces, bulk residentials, and industrial properties (farmlands and warehouses).
DIB’s commercial real estate financing options include:
Ijarah
Minimum down payment of 50%
Loan tenure up to 10 years
Source of payment: rentals of the property
For ready properties: residential, office buildings, and villa complexes
Istisna
Minimum down payment of 25% of the total construction cost
Loan tenure up to 10 years
For the construction of buildings, residential towers, villas, as well as manufacturing of aircrafts, ships, machines, and equipment
Murabaha
Minimum down payment of 25%
Loan tenure up to 10 years
Source of payment: rental income, business cash flows
For ready properties: residential, office buildings, and villa complexes
Application process
The first page of the Dubai Islamic Bank mortgage application is below. If you get a loan through a mortgage broker, their experts can help you properly fill out the application and answer any questions you may have.
Along with the application form, you’ll be required to submit some personal, income, and property documents so that DIB can process your mortgage application.
Personal documents that all applicants must provide:
Completed application form signed by all applicants
Valid passport copy (with visa page for UAE residents)
Arrangement fee cheque
If salaried: fee cheque is issued from bank account where salary is credited
If self-employed: fee cheque is issued from personal bank account
Required income documents for DIB mortgage application | |
|---|---|
Salaried: | Self-employed: |
Salary Certificate in original (not more than 30 days old) | Audited Financial Statements for the last 3 years |
Bank statements in original for the last 6 months for all applicants whose income is being considered (for the account where salary is being credited) | Valid Trade/Commercial/Professional License copy |
Statements should reflect credit of variable salary or bonus/incentive/commission (If applicable) | Copy of Memorandum and Articles of Association (first Memorandum and all Amendments made to date) |
Other bank statements for last 6 months, if other income (rental, interest etc.) is not received in salary bank account | Copy of last 6 months bank statements of the Company |
Other bank statements for last 6 months if fixed obligations are being paid from any other bank accounts | Last 6 months personal bank statements in original (for all applicants whose income is being considered) |
Proof of previous employment (if length of current service is less than one year) | Copy(ies) of bank facility letter(s), if the company has availed banking facilities from other Banks |
Liability letter in original (not more than 30 days old) from banks where salary/other income is credited | Liability Letter in original (not more than 30 days old) from banks where the company/applicant(s) have accounts |
You’ll also need the following property documents for your application:
Copy of the reservation contract
Direct sale: reservation contract (duly signed by the buyer and seller)
Resale: reservation contract or MOU (duly signed by the buyer, seller, and real estate agency)
Copies of down payment receipts
Copy of the Purchase Contract from the developer
Copy of the title deed
Copy of the seller’s passport
Other documents you may need to provide include:
For rental income: original valid tenancy contract, copy of property ownership documents, and original bank statements reflecting rental income
Interest/dividend income documents
Copy of certificates and/or investment instruments/bonds
For non-residents: Credit Bureau Report (not more than 30 days old) and copy of signed tax returns (with all schedules) for the last 2 years
For Ijarah commercial financing
Individuals: site plan copy and copy of lease contracts covering purchase of existing rental property
Companies: site plan copy, copy of lease contracts covering purchase of existing rental property, valid trade license copy, commercial registry copy, partnership agreement copy (if applicable), valid passport copies of partners (if applicable), copy of Articles of Association, and last 3 years’ financials
To sum up
DIB has a multitude of Islamic financing options that are available to all types of borrowers, not just Muslims. It’s worth considering Islamic mortgages and if it could be a favorable financing option for your real estate purchase. However, Islamic mortgages come with a set of terminology that can be confusing for some borrowers. Our mortgage brokers at Kredium can help demystify these loans and guide you from the start to the end of your mortgage process. We also regularly post mortgage and real estate blogs to help UAE real estate buyers stay up-to-date.
If you’re looking for a property in Dubai, we have over 5,000 properties. A mortgage calculator can help you as you search, allowing you to estimate your monthly payments and potential rental yield. You can register on our website or contact us directly to start getting help.
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