Handover Payment Mortgage: Financing a 20/80 or 40/60 Plan

A 20/80 or 40/60 plan is comfortable at the start. You pay a small share while the building goes up and leave the bulk for handover. Then handover arrives, and that bulk turns into one large bill with a fixed deadline. Many buyers pay it with a mortgage, and these deals make up a good part of my work. Below I explain how handover financing works, why the bank's loan often falls short of what you owe the developer, and what to sort out early.

What 20/80 and 40/60 mean

The first number is the share of the price you pay during construction. The second is what's left at handover.

There are other structures too, including post-handover plans where part of the price is paid after you get the keys. I cover those in Payment plans and post-handover.

Keep in mind that the final payment is due on the date in your developer contract. A mortgage helps you fund it on time. It doesn't move the date.

Banks that finance handover payments

Here is what banks say on their own sites at the time of writing:

• Dubai Islamic Bank offers a final and handover payment product over up to 25 years (DIB ↗).
• FAB waives processing fees for salary-transfer customers making handover payments to developers and gives non-salaried customers a 50% discount. The cap and the offer end date are on the page (FAB ↗).
• ADIB includes financing of handover payments to developers in its buyout range (ADIB ↗).
• Emirates Islamic mentions special handover finance packages for approved projects (Emirates Islamic ↗).

Some developers also have bank partnerships. Emirates NBD, for instance, announced one with H&H: mortgages for buyers who reach the 50% payment milestone, with financing through to handover (Emirates NBD ↗).

Banks don't finance every project, so check first that your bank works with your developer and your building.

The CBUAE limits behind the numbers

The Central Bank's Article 3 ↗ caps loan-to-value:

• off-plan property: 50% maximum for every buyer category;
• a first home for most of my clients: up to 80% up to AED 5m, and up to 70% above AED 5m;
• second and further homes, investment purchases: up to 60%.

The cap your bank applies at handover depends on the build stage and on the bank's own policy. I always ask about it before anything else.

Article 2 ↗ adds a rule for staged construction financing. The buyer's own equity goes to the developer first, and the bank's money follows. Payments are tied to construction milestones, which the bank or an independent professional confirms.

Where the gap opens: an example

These figures are illustrative only.

You bought for AED 2,000,000. The bank will lend 80% of its valuation.

20/80 plan. You've paid AED 400,000, and AED 1,600,000 is due at handover.

40/60 plan. You've paid AED 800,000, and AED 1,200,000 is due at handover.

On 20/80, a handover mortgage only covers the balance if the valuation is full and the LTV is high. If the valuation slips even a little, you'll need your own cash. A 40/60 plan leaves room even under a stricter cap. At 60% of a 2,000,000 valuation the loan is 1,200,000, which is exactly the balance.

It gets harder if the bank still treats the unit as off-plan when you apply. Then the 50% cap applies, and a 2,000,000 valuation gives you a 1,000,000 loan. That leaves a 600,000 gap on 20/80 and 200,000 on 40/60. This is why the first thing I ask a bank is which LTV it will apply to this particular unit.

There are also costs the mortgage won't cover. DLD mortgage registration is 0.25% of the loan plus fixed fees (DLD ↗), and you'll pay bank charges, valuation and insurance on top.

From my practice. A buyer was purchasing a developer unit with an outstanding balance and penalties. We expected 60% LTV, but the bank's valuation came in low and the LTV ended up at 50%. The buyer covered the difference with an additional loan, and the deal closed successfully. Since then I model the low-valuation scenario upfront rather than on the day the bank sends its report.

Tracking the build yourself

The handover deadline usually follows completion, and you can watch progress without waiting for the developer's letter:

• Real Estate Project Status ↗ on the DLD website shows the completion percentage and project status;
• the Dubai REST ↗ app shows completion percentage, site photos, the escrow account number and the payments due from you.

Compare the escrow account number with the developer's payment instructions. According to the DLD FAQ, all money paid by off-plan buyers, including funds from their mortgage lenders, goes into the project's escrow account. If someone asks you to send the final instalment to a different account, find out why before you pay.

Once completion is close, start the process with the bank.

Steps in order

1. Pre-approval, several months before handover. The bank checks your income and DBR, which means total loan repayments must stay within 50% of income.
2. Statement of account from the developer. It shows what you've paid, what's left and any penalties.
3. Check for arrears. For a mortgage on a unit in the provisional register, DLD requires the developer's e-NOC through Dubai REST, and arrears or penalties can hold it up. More in Developer NOC with arrears and penalties.
4. Bank valuation. If it comes in lower than expected, decide how you'll cover the gap.
5. Offer letter and signing.
6. Payment to the developer and mortgage registration at DLD. The bank pays its share, you pay yours, and the mortgage is registered.

You won't receive the loan yourself. FAB, for example, says that after DLD registration it disburses by manager's cheque or account transfer to the seller, developer or third party. Your own share also goes to the developer's account listed in your contract. Everyone, the bank included, can then see exactly where the money went.

If a mortgage doesn't fit

Sometimes the bank won't finance the project, or the gap is too big. You then have a few options:

• agree a post-handover plan with the developer, if it offers one;
• sell before handover. The DLD FAQ says resale before transfer to the land registry is possible once you have the developer's NOC (DLD ↗);
• cover the gap from your own funds.

Which one makes sense depends on your circumstances. I go through this with clients when they pick a payment plan, long before the keys.

Mistakes that cost money

• Choosing 20/80 because you plan to get a mortgage, without modelling the gap. I see this most often. Banks lend on their valuation, and your contract price matters less to them.
• Going to the bank only after the completion notice. There may not be enough time for approval, valuation and the NOC.
• Missing instalments during construction. Arrears and penalties show up on the statement and can delay the NOC.
• Forgetting about DBR. A car loan or new credit cards taken during construction will reduce the approved amount.
• Leaving no cash buffer. Even with a perfect calculation you still pay DLD fees, bank charges and valuation.

How I help

I model the gap under several valuation scenarios, find a bank that works with your project, request the statement and NOC from the developer, and run the deal through to DLD registration. There's more on the handover payment page.

You can work out your payment and upfront costs in the calculator. If handover is less than six months away, send me your payment plan and developer statement on WhatsApp, and I'll tell you whether a mortgage will cover it.