LTV: Loan-to-Value Ratio

LTV is the primary risk metric lenders use when assessing a mortgage application. It is calculated by dividing the loan amount by the appraised value of the property, then expressing the result as a percentage. A property worth AED 1,000,000 with a AED 750,000 mortgage carries a 75% LTV. The remaining 25% is the borrower's equity, funded by a down payment.\n\nThe lower the LTV, the less risk the lender is taking on, which generally improves the applicant's chances of approval and can influence the interest rate offered. A higher LTV means the lender is financing a larger share of the asset, and if the borrower defaults the lender has less of a cushion if property values fall.\n\nIn the UAE, the Central Bank of the UAE (CBUAE) sets maximum LTV limits for mortgage lending. These caps differ depending on whether the borrower is a UAE national or an expatriate, and on whether the property is a first home or a subsequent purchase. Always check the CBUAE's published mortgage regulations for the current applicable caps before proceeding with a mortgage application.

For expats buying property in the UAE, the CBUAE's LTV cap directly determines the minimum down payment you must bring to the table. A lower LTV cap means a larger down payment is required, which affects how much liquid capital you need to set aside before you can complete a purchase. This is a hard regulatory limit - no lender operating in the UAE can legally exceed it.\n\nLTV also affects your exit options. If you buy at a high LTV and property values soften, you could find yourself in a position where the outstanding loan balance is close to - or exceeds - the resale value of the property. Factor this into your resale liquidity assumptions before committing, particularly on off-plan units where the appraised value at handover may differ from the price you agreed at launch.