What is LTV (Loan to Value)?
Loan to Value — abbreviated as LTV — is the ratio between the mortgage loan amount and the appraised value of the property, expressed as a percentage. It determines how much of the property price the bank will finance and, consequently, how much you need to pay as a down payment. In the UAE, LTV limits are set by the Central Bank and vary based on buyer nationality, property value, and purpose.
How LTV Works in the UAE
The UAE Central Bank mandates maximum LTV ratios for residential mortgages:
- UAE nationals (first property under AED 5M): Up to 80% LTV — meaning a minimum 20% down payment.
- UAE nationals (first property over AED 5M): Up to 70% LTV — 30% down payment.
- Expats (first property under AED 5M): Up to 80% LTV — 20% down payment.
- Expats (first property over AED 5M): Up to 65% LTV — 35% down payment.
- Second property (any buyer): Up to 60-65% LTV — 35-40% down payment.
- Off-plan properties: Up to 50% LTV — banks are more conservative with unfinished projects.
The property value used in LTV calculation is based on the bank’s independent valuation, not the purchase price. If the bank values the property lower than the agreed price, the buyer must cover the shortfall from their own funds.
Practical Example
You are an expat purchasing your first apartment in Dubai Marina for AED 1.8 million. The bank appraises it at AED 1.75 million. With an 80% LTV cap, the maximum mortgage is AED 1.4 million (80% of AED 1.75M). Your down payment is AED 400,000 — the AED 350,000 difference between the valuation and the loan, plus AED 50,000 for the gap between the price and the valuation. Add approximately AED 72,000 for DLD fees (4%) and AED 15,000-25,000 for bank processing, valuation, and mortgage registration. Your total upfront cost: roughly AED 500,000.
Why LTV Matters for Investors
LTV determines your capital requirement and leverage. A higher LTV means less cash upfront but higher monthly payments and more interest over the loan term. A lower LTV reduces borrowing costs but requires more capital. Understanding LTV limits is essential for financial planning. We at UAE-Prop help investors structure their purchases to optimize LTV, comparing bank valuations and identifying financing strategies that balance upfront costs with long-term affordability.
