Trying to figure out how to sell mortgaged property in Dubai but feeling a bit lost? Hang tight—you’re in the right place! Let’s break it down! In this guide we simplify the steps involved in selling mortgaged property in Dubai, providing you with necessary information on applicable fees, required documents, and the unique considerations for selling off-plan mortgaged properties.
This comprehensive guide provides you with all the information you will need to confidently tackle this rather complex process. From understanding your mortgage terms to preparing for negotiations, this guide covers all the important aspects. Let’s make your property sale as smooth and successful as possible!
What is a Mortgaged Property?
A mortgaged property simply means real estate offered as collateral for the financing of a loan. If the person or entity securing that loan from a bank takes a loan to purchase the property, the bank will be said to have an interest in the monetary terms of that property until the loan is fully paid.
In case the borrower, that is, the homeowner fails to pay the mortgage within due time, the lender may start a foreclosure process legally to recover the remaining outstanding loan. With every paid installment, the outstanding balance of the loan is reduced gradually, and when the loan amount is fully paid, complete ownership rights are available to the homeowner free of the claim of the lender.
When the property is sold, the proceeds are used to pay out any remaining mortgage balance so that the new owner receives the property free from liens. This establishes a good base for successful sales and negotiations with any other buyer. Now, let’s dig deep to find out how to sell mortgaged property in Dubai.
Selling Mortgaged Property in Dubai: What You Need to Know
Dubai homeowners could be at rest as they can even sell mortgaged properties before full payment of the mortgage. However, selling a mortgaged property in Dubai is still a different story and could turn out more complicated if not known properly.
Knowing the terms of your mortgage, getting necessary approvals, finding the right buyer, and transferring ownership, we guarantee a pain-free and smooth experience. Let us help you handle the mortgaged property selling services for you so that you can move forward with confidence. Let’s get started with understanding the steps about how to sell mortgaged property in Dubai.
Step 1: Request a Liability Letter From Your Lender
The seller should first request a liability letter from the bank. This liability letter would state the outstanding amount left on the mortgage, which needs to be settled. In short, this piece of paper is fundamental to the determination of both the seller and potential buyer about the concrete financial obligation associated with the property.
Ideally, it may take days, or sometimes weeks, depending on the bank’s policy, to get the liability letter. It’s important to note that some banks may also charge a fee for issuing this letter.
Once in possession, the seller can enter into settlement terms with the buyer so that all the parties are made aware of the debt outstanding to be cleared upon transfer of property.
Step 2: Apply for a No Objection Certificate (NOC) From the Developer
After receiving the liability letter, an applicant will then source for a No Objection Certificate (NOC) from the property developer after receiving the liability letter. A NOC guarantees that the developer has no objections to the transfer of sale over a given property, subject to any outstanding service charges or fees having been paid off. The charges for obtaining NOC are usually between AED 500 – AED 1,000, which may vary from bank to bank.
The seller is expected to go with the buyer to the developer’s office so that he can receive the NOC. However, this might cost him an issuance fee by the developer. The process may take a few days up to a week depending on the procedure of the developer. Without this document, the sale cannot proceed since this is one of the most highly required documents in property transfer. Here you can learn: how to apply for the NOC.
Step 3: Secure a Property Hold in the Buyer’s Name
Before the buyer clears the seller’s mortgage, an important process called ‘property blocking’ takes place to safeguard the buyer. This step confirms the temporary blocking of the property in the buyer’s name. Hence, no other transaction or third-party claims could be raised while finalizing the sale. Moreover, it will also give a chance to the buyer to settle the seller’s mortgage without any fear that the property might be sold to somebody else.
This process is complete when the seller, buyer, and their agents meet a Dubai Land Department (DLD) registration trustee office. The following documents are required to block the property:
- A liability letter from the seller’s bank
- Form F (Memorandum of Understanding)
- NOC from the developer
- Copy of the title deed
- Cheque to the seller’s bank for the liability amount
- Cheque to the seller for the remaining balance of the purchase price
- Cheque to the DLD for the 4% transfer fee
- Original passport, visa, and Emirates ID for both the buyer and seller
A deposit may also be required at this stage to formalize the agreement. Once the property is blocked, legal protection is in place, guaranteeing transparency and security as the sale moves forward.
Step 4: Acquire a Clearance Letter and Original Title Deed
The bank would then issue a clearance letter or mortgage release letter once it received the cheque from the buyer and cleared the mortgage of the seller, thereby confirming that all the funds tied to the property are fully paid.
Besides that, the original title deed shall be released from the bank and issued to the seller. Then, he is to collect it from DLD where the title deed is a piece of evidence that will ascertain the full ownership, thus making sure there will be no debts at the property to cause hassle during its handover to the buyer.
Step 5: Finalize the Property Transfer to the Buyer
With all necessary documents in place—liability letter, NOC, clearance letter, and original title deed—the final step is to transfer the property to the buyer’s name. This is done at the DLD or a registered trustee office, where both parties and their legal representatives will have to be present before the transfer documents are signed.
The mortgage of the seller is discharged, and a new title deed is issued in the name of the buyer. It will become easy if a buyer aims to purchase the property for cash. But if the buyer will also finance his purchase through a mortgage, then the transfer may take a little time since the release of his mortgage happens after his lender finally approves the loan. In such a case, the closing blockage step is not required, since the title deed will be transferred to the buyer’s bank.
Documents required at this stage include:
- Original title deed
- Mortgage release letter from the bank
- Passport, Visa, and Emirates ID (for both buyer and seller)
Fees Associated with Selling Mortgaged Property in Dubai
Here is a summary, albeit brief, of some of the charges you’re likely to sustain when you sell a mortgaged property in Dubai. Mastering these charges is beneficial for a smooth transaction and good financial management.
Services | Fee (AED) |
Registration | 1,000 |
Knowledge Fee | 10 |
Innovation Fee | 525 |
Mortgage Release Procedure | 1,290 |
Fee for Registrar to Release the Mortgage | 315 |
For a Land Map of Lands Outside of the Jurisdiction of Dubai Municipality | 100 |
For a Land Map of the Unified Map at Dubai Municipality | 225 |
For a Plan of Building and an Apartment | 250 |
Title Deed Issuance | 250 |
For Each Drawing | 10 |
Mortgage Fee | 0.25% of the Total Mortgage Value |
Please be aware that there would be a registration fee payable for the sale, valued according to the property; if the rate of the property is below AED 500,000, it would be AED 2,100, whereas if the rate exceeds AED 500,000 then the fee would be AED 4,200. However, the registration fee is exempted if the mortgage is registered on the same day.
Tax Implications
Dubai offers an appealing advantage for property transactions as there are no capital gains taxes. However, it is advisable to seek guidance from a tax advisor, especially when one happens to be a foreign investor or has tax liabilities besides this.
That is, therefore, the way toward full compliance with legal prescriptions and complete comprehension of what impacts your financial status. Knowing these legal requirements will help you prepare in advance and make the sale process easier by reducing the risk of encountering problems.
Procedure for Restricting Mortgaged Property in Dubai
To restrict a mortgaged property in Dubai, follow the procedure outlined on the Dubai Land Department (DLD) website:
- Begin by going to one of the Real Estate Registration Trustee offices.
- Hand over the necessary documents to the office employee.
- The employee will verify your transaction data to confirm everything is in order.
- Pay the applicable fees and receive a receipt for your records.
Required Documents
To successfully restrict a property in Dubai, you need to provide the following documents:
- Debit Certificate or Developer’s Letter: This should reflect the outstanding amount on the said property.
- Power of Attorney: Include a power of attorney document if you appoint a representative to act on your behalf in decisions.
- Emirates ID Cards: Cards for both the buyer and seller, plus photocopies of valid passports for non-nationals.
- Manager’s Cheques: You will need to draft manager’s cheques for the following amounts:
—> To the Developer or Bank: A cheque for the outstanding debt amount.
—> To the Seller: A cheque for the remaining balance due.
—> To the Dubai Land Department: A cheque for 4% of the sale price as sale fees.
—> To the Dubai Land Department: A cheque for AED 1,020 as a restriction fee.
By gathering all these documents and following the outlined steps, you can effectively restrict a mortgaged property in Dubai, guaranteeing that all financial obligations are clearly documented and legally recognized.
Fees for Blocking a Mortgaged Property in Dubai
Here’s a summary of the fees you need to pay specifically for blocking a mortgaged property in Dubai:
Service | Charges (AED) |
Property Blocking | 1,000 |
Knowledge Fees | 10 |
Innovation Fees | 10 |
Trustee Registration | 500 |
Please note that the blocking fee applies only to the mortgaged property and not to all the costs associated with the selling of a mortgaged property in Dubai.
Is It Possible to Sell an Off-Plan Mortgaged Property in Dubai?
It is possible to sell an off-plan property that is under mortgage in Dubai but with some salient concerns to be borne in mind. First, there is a need to consult the developer to determine whether owners can sell the property. Many developers have restrictions on selling the off-plan properties prior to the completion of certain percentages of the payment plan, and different developers have different policies.
Do not forget that the ready property can be sold very differently from selling an off-plan mortgaged real estate. More importantly, beware that extra charges are on a case-to-case basis so preparing for it will be advisable, so as you push for the sale, have more funds in your bank.
Hopefully, this guide on how to sell mortgaged property in Dubai covers all the important aspects that need to be followed in Dubai. After gaining knowledge of what is needed and what may be asked for, you will feel confident enough to carry out this process.
Based on the guidelines outlined in this guideline, you shall be more than well equipped and effectively prepared to successfully sell mortgaged property in Dubai with minimal challenges. Of course, for any particular questions or a further necessity for assistance, please feel free to reach out to our real estate experts as well as legal experts in order to be sure that you are making an informed decision.
FAQs
Can I sell my property in Dubai if I have a mortgage?
Yes, it is possible to sell a property with a mortgage in Dubai. The whole selling process of the property is covered by using the sale proceeds to pay off the balance left on the loan.
Where can I register the sale of a mortgaged property in Dubai?
You can register for the sale of a mortgage property in Dubai through the website of the Dubai Land Department (DLD). It is the authority governing all property deals within Dubai. You can visit their offices to initiate the registration process.
Can I rent a mortgaged property in Dubai?
Yes, you can rent out a mortgaged property in Dubai. If you wish to invest in rental property, then you will require a buy-to-let mortgage as they are expensive since down payments for such mortgages should be made of 40-50%.
Can I sell my property before paying off the mortgage in Dubai?
Yes, you can sell a property in Dubai for sure even if you still need to fully pay for your mortgage. This is the case when you apply the sale proceeds to settle for the balance remaining in your mortgage. Normally, you must acquire a liability letter from your lender and indicate how much you owe on the loan and if an early settlement fee applies. Once the sale price is paid, you pay the lender the remaining amount and get the surplus money.