Two types of agreements<\/h3>\n\n\n\n- Option to purchase: <\/strong>Under this scheme, the buyer pays an \u2018option fee\u2019, a mutually agreed percentage of the purchase price, in exchange for the right to buy the property at a later date. Should you choose not to proceed with the purchase, you lose the option fee.<\/li>
- Purchase agreement:<\/strong> All terms are mutually agreed upfront with the buyer and developer deciding on a fixed purchase price, or choosing to determine the price with a future valuation at an agreed date. <\/li><\/ul>\n\n\n\n
Is this a legal arrangement?<\/h3>\n\n\n\n
Yes. The Dubai Land Department (DLD) launched the rent-to-own (Ijarah) service, a specific title deed register to provide a clear legal framework to facilitate such transactions.<\/p>\n\n\n\n
What is the legal framework for rent-to-own schemes in Dubai? To find out more check this<\/a>. <\/em><\/p>\n\n\n\nHow does rent-to-own differ from a mortgage?<\/strong><\/h2>\n\n\n\nBuying a home via a bank mortgage is common practice, but the main hurdle faced by Dubai residents is the requirement for a minimum 25% down-payment, per UAE Central Bank regulations. In addition to this, there are further upfront transaction costs that must be accounted for.<\/p>\n\n\n\n
For a detailed breakdown of upfront costs, read out article on \u2018Factors to consider when buying a home in Dubai.\u2019<\/a><\/em><\/p>\n\n\n\nThe key difference between a rent-to-own scheme and a mortgage<\/strong> is the upfront payment required.<\/p>\n\n\n\nUpfront costs for a mortgage:<\/strong><\/h3>\n\n\n\n- 25% down-payment<\/strong>, from cash savings<\/li>
- Approximately 7-8% of the property purchase price<\/strong> for DLD fees, real estate agent fees and bank fees, which can be financed through a personal loan.<\/li><\/ul>\n\n\n\n
Upfront costs for a rent-to-own scheme:<\/strong><\/h3>\n\n\n\n- Approximately 5-8% of the property purchase price<\/strong><\/li><\/ul>\n\n\n\n
Benefits of rent-to-own<\/strong><\/h2>\n\n\n\n- Buying your first home is more affordable and accessible <\/strong>as the pressure of a large down-payment is removed.<\/li>
- Rent payments help you build equity<\/strong> as each installment accumulates toward the acquisition of an asset.<\/li>
- With rent-to-own schemes you can try before you buy<\/strong>, living in the property before you agree to proceed with the purchase.<\/li>
- The application process<\/strong> for a rent-to-own scheme is typically less complicated than applying for a traditional mortgage.<\/li><\/ul>\n\n\n\n
What to watch out for<\/strong><\/h2>\n\n\n\n- You must clearly understand the terms and conditions of the agreement <\/strong>including market price fluctuations, title deed ownership throughout the contract, and the timeframe for payment and exit clauses, before signing the contract.<\/li>
- You may end up paying a higher premium<\/strong> compared to the going rate for the same, or similar, properties that are not under a rent-to-own scheme.<\/li>
- Should you proceed to buy the property, you should ensure you qualify for a mortgage to complete the purchase<\/strong>.<\/li><\/ul>\n\n\n\n
How does the payment plan for rent-to-own schemes look?<\/strong><\/h2>\n\n\n\nThe payment plan under each rent-to-own scheme is unique as the terms are individually decided under a contract between the developer and the buyer. <\/p>\n\n\n\n
Whilst the DLD has issued guidelines and associated fees regarding registration, financing, transfer and cancellation of rent-to-own contracts, the schemes created to date have been developed individually, on a case by case basis.<\/p>\n\n\n
\n \n \n ![\"\"](\"\/guides\/wp-content\/uploads\/2019\/07\/mf-logo-en.png\")
\n <\/div>\n \n Compare between various mortgage offers and interest rates<\/p>\n <\/div>\n
\n Compare Mortgages<\/a>\n <\/div>\n <\/div>\n<\/div>\n\n\n\nWhat should be included in a rent-to-own contract?<\/strong><\/h2>\n\n\n\n- Value of the property<\/strong>, agreed between developer and buyer<\/li>
- Timeframe<\/strong> of the lease term, agreed between developer and buyer<\/li>
- Title Deed ownership <\/strong>throughout contract duration<\/li>
- Exit terms<\/strong><\/li>
- Penalty clause<\/strong> for defaulted repayments<\/li>
- Percentage of down-payment, if any, to be refunded<\/strong>, should you decide to exit the contract <\/li>
- Clause related to sudden job loss,<\/strong> missed repayments or mortgage rejection at the time of purchase (once the lease term ends)<\/li>
- Property maintenance terms, <\/strong>who is responsible for the upkeep of the property throughout the contract duration<\/li><\/ul>\n\n\n\n
What are the fees for rent-to-own schemes?<\/strong><\/h2>\n\n\n\nAs determined by the DLD, the following fees are applicable when entering a rent-to-own contract:<\/p>\n\n\n\n
Seller (Developer) fees:<\/strong><\/h3>\n\n\n\n- 2% of the sale price<\/li><\/ul>\n\n\n\n
Buyer fees:<\/strong><\/h3>\n\n\n\n- 2% of the sale price and;<\/li>
- AED 250 Title Deed Issuance Fee<\/li>
- Map Issuance Fees (dependent on the type of property) <\/li>
- 0.25% of the rent amount<\/li>
- AED 4,000 Registration Fee for properties AED 500,000 or above;
AED 2,000 Registration Fee for properties less than AED 500,000<\/li> - AED 10 Knowledge Fee (added to each fee)<\/li><\/ul>\n\n\n\n
Read more about Rent-to-own schemes<\/a>. <\/p>\n\n\n\n
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Is this a legal arrangement?<\/h3>\n\n\n\n
Yes. The Dubai Land Department (DLD) launched the rent-to-own (Ijarah) service, a specific title deed register to provide a clear legal framework to facilitate such transactions.<\/p>\n\n\n\n
What is the legal framework for rent-to-own schemes in Dubai? To find out more check this<\/a>. <\/em><\/p>\n\n\n\n Buying a home via a bank mortgage is common practice, but the main hurdle faced by Dubai residents is the requirement for a minimum 25% down-payment, per UAE Central Bank regulations. In addition to this, there are further upfront transaction costs that must be accounted for.<\/p>\n\n\n\n For a detailed breakdown of upfront costs, read out article on \u2018Factors to consider when buying a home in Dubai.\u2019<\/a><\/em><\/p>\n\n\n\n The key difference between a rent-to-own scheme and a mortgage<\/strong> is the upfront payment required.<\/p>\n\n\n\n The payment plan under each rent-to-own scheme is unique as the terms are individually decided under a contract between the developer and the buyer. <\/p>\n\n\n\n Whilst the DLD has issued guidelines and associated fees regarding registration, financing, transfer and cancellation of rent-to-own contracts, the schemes created to date have been developed individually, on a case by case basis.<\/p>\n\n\n Compare between various mortgage offers and interest rates<\/p>\n <\/div>\n As determined by the DLD, the following fees are applicable when entering a rent-to-own contract:<\/p>\n\n\n\n Read more about Rent-to-own schemes<\/a>. <\/p>\n\n\n\nHow does rent-to-own differ from a mortgage?<\/strong><\/h2>\n\n\n\n
Upfront costs for a mortgage:<\/strong><\/h3>\n\n\n\n
Upfront costs for a rent-to-own scheme:<\/strong><\/h3>\n\n\n\n
Benefits of rent-to-own<\/strong><\/h2>\n\n\n\n
What to watch out for<\/strong><\/h2>\n\n\n\n
How does the payment plan for rent-to-own schemes look?<\/strong><\/h2>\n\n\n\n
\n <\/div>\n What should be included in a rent-to-own contract?<\/strong><\/h2>\n\n\n\n
What are the fees for rent-to-own schemes?<\/strong><\/h2>\n\n\n\n
Seller (Developer) fees:<\/strong><\/h3>\n\n\n\n
Buyer fees:<\/strong><\/h3>\n\n\n\n
AED 2,000 Registration Fee for properties less than AED 500,000<\/li>
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