How do the 50% DBR rule and 7x income cap work?

What counts towards the 50% DBR?

Every regular monthly debt repayment counts towards the 50% [VERIFY] debt-burden ratio, together with the new mortgage instalment. The ratio compares those repayments with your gross monthly income, which is your pay before deductions. If the total is within the limit, the DBR test is passed. If it is above the limit, the bank must reduce the loan until it fits.

Typical commitments are car loans, personal loans, existing mortgages, student loans and the minimum payments on other credit. Only repayments that are certain and recurring are included, which is why a bank reads your credit report and bank statements before it decides.

The ratio works backwards from your income. Multiply your gross monthly income by 50% [VERIFY], subtract the repayments you already have, and what remains is the largest instalment the bank can approve. A smaller instalment then translates into a smaller loan, as the worked example in this guide shows. Because the test uses gross income, a higher salary lifts the allowance directly.

How are credit cards counted?

Credit cards count by limit, not by balance. A bank counts 5% [VERIFY] of your total card limits as a monthly commitment, even if you pay the balance in full every month. A card with no balance still reduces the instalment you can be approved for, because the limit is treated as debt you could draw on at any time.

That makes unused cards worth reviewing before you apply. If you hold several cards with large limits and rarely use them, cancelling the ones you do not need can raise the amount a bank is willing to lend.

Reducing a limit, rather than cancelling the card, is another way to lower the figure a bank counts. Other credit lines are treated in a similar way. An overdraft or a store credit facility with a limit can be counted, so ask your bank how each of your facilities will be assessed. The pre-qualification tool on this site asks for your total card limits for this reason, and applies the same percentage as the Central Bank rule.

What is the 7x income cap?

The 7x income cap limits a mortgage to a multiple of your annual income, which is 7 times for an expat and 8 times for a UAE national [VERIFY]. Annual income means your gross monthly income multiplied by twelve. The cap is that figure multiplied by the number for your residency. Joint applicants can combine their incomes, and the cap is then applied to the total.

The cap is a ceiling on the size of the loan. It does not look at your debts or at the price of the property, so it works alongside the debt-burden ratio and not instead of it. For many borrowers on a modest salary with some existing debt, the DBR is the lower number. For those with no debts, the income cap is more likely to be the one that decides.

The table in the next section sets out the multiple and the loan-to-value limit for each type of buyer, using the same figures as our calculators.

Which limit applies first?

The lowest of three limits applies, and which one that is depends on your situation. Banks sometimes call this the lending ceiling. The three are the DBR-limited loan, the income cap and the loan-to-value (LTV) limit, which is the largest share of the property price a bank will lend. A bank calculates all three and approves the smallest, so there is no fixed order and no single rule that always decides.

In practice, the DBR is usually first for borrowers with existing commitments, because every dirham of debt cuts into the 50% [VERIFY] allowance. The income cap tends to decide for borrowers with high income and no debts. The LTV limit decides when the property is the limit, such as a modest purchase price for a high earner, and it sets the minimum deposit.

The table below lists the multiples and first-home LTV limits for each residency, so you can see the second and third limits side by side. The DBR-limited loan is not in the table, because it depends on your own debts and on the rate.

Worked example: AED 25,000 salary, AED 6,000 commitments

An expat earning AED 25,000 a month with AED 6,000 of existing repayments is limited by the DBR. The steps below show each calculation, from the maximum instalment to the final loan, and name the binding limit. The figures come from the same code as our pre-qualification tool, not from a typed sum, so they match what the tool shows.

The example assumes a first home that is ready to move into, at a price of AED 3,000,000, with a borrower aged 35. The rate is the illustrative assumption described above, used to turn an instalment into a loan amount. It is not an offer, and a real bank rate may be higher or lower.

Notice what the example shows. The income cap alone would allow a much larger loan than the DBR does, but existing debts of AED 6,000 take a large share of the allowance, so the DBR decides. Clearing that debt before applying would lift the DBR-limited loan.

How do banks stress-test the rate?

Some banks test whether you could still afford the loan if the interest rate rose, so the instalment they use can be higher than the one you will start paying. This is common for variable-rate loans, where the rate moves with the market. The exact test differs by bank and product, and the rules for it are a point we are still confirming [VERIFY].

A stress test works on the same principle as the debt-burden ratio: it asks whether your income can carry the repayments in a worse case. If the bank applies a higher test rate, the loan it will approve falls, even when your actual starting rate is lower. That is one reason two banks can give different answers for the same salary.

Ask each bank which rate it uses to assess affordability, and whether the answer is different for fixed and variable products. Our calculator shows how a fixed rate reverts to a variable one after the fixed period, so you can see what an instalment may look like later.