The valuation and the insurance: two bank requirements worth understanding before you sign

Two items appear in every financed Dubai purchase and get about one line each in most guides. Both are worth more attention than that: one can change how much cash you need on transfer day, and the other decides who pays when something goes wrong in an apartment you own.

The valuation is not yours, and you pay for it

• The bank orders it, from a valuer on its own panel, for its own purposes.
• You pay for it — a few thousand dirhams — and it is payable whether or not the loan is approved.
• It is one of three items that make a mortgage cost more than a cash purchase, alongside registration of the charge with the Land Department at 0.25% of the loan and the bank's arrangement fee, up to 1% and negotiable. Together they add roughly one and a half per cent to the transaction.
• A second bank means a second valuation fee. Shopping the loan around after a disappointing result is not free.

What happens when it comes in below the price

• The loan is calculated on the lower of price and valuation, not on what you agreed to pay.
• The gap is found in cash, by you, on top of the deposit and the transaction costs. This is the mechanism that derails completions at short notice.
• Valuations lag a rising market because they rest on completed comparable transactions, and those are by definition from the recent past.
• Unusual units value awkwardly: an atypical layout, a very large apartment in a building of small ones, a unit whose premium is a view that the comparables do not have.
• The options are narrow and worth knowing in advance: ask what comparables were used and whether relevant evidence was missed, put more cash in, renegotiate the price, or go to another lender and pay for another valuation. Deciding between those under time pressure is how people overpay.

A valuation is not a survey

This is the misunderstanding that costs the most. A mortgage valuation answers one question for the bank: what is this worth as security. It does not test the air conditioning, the water pressure, the waterproofing or the state of the lifts, and it does not produce a list of defects for you to have fixed. If you want to know the condition of what you are buying, that is a separate inspection with a separate provider — a snagging report on a new unit, a condition survey on a resale. The valuation figure being satisfactory tells you nothing at all about the flat.

The insurance the bank requires

• Life cover for the term, assigned to the bank, so that the loan is settled rather than inherited.
• Property cover, which protects the bank's security.
• You are usually not obliged to buy either from the bank. Ask whether cover arranged outside its panel is accepted — it frequently is, and it is frequently cheaper.
• Read how the premium behaves over time. Life cover that reprices with age looks inexpensive in year one and is a different number in year ten.
• Declare health history accurately. A policy that pays nothing is worse than no policy, and the moment it fails is the worst possible one for a family.

The cover nobody requires and everybody needs

• The building's own policy insures the structure, and you already pay for it inside the service charge.
• It does not insure the contents of your apartment, nor your liability if water from your flat damages the one below.
• That second item is the common one. Escape of water between apartments is the most frequent claim in tower blocks anywhere, and the argument that follows is about who was insured.
• A cash buyer is required to hold none of this, which is precisely why cash buyers so often hold nothing at all. Contents and liability cover for an apartment is a small annual number against the size of the asset.
• If you let the property, check whether the policy contemplates a tenant. Some do not, and the exclusion surfaces at claim time.

The short version

Budget the valuation as a cost rather than a formality, and know before you sign what you will do if it comes in low. Treat the bank's insurance requirements as the bank protecting itself, not you — then buy the cover that protects you, which is the part nobody will ask for. Both decisions are cheap to make early and expensive to make on transfer day.

Based on central bank mortgage requirements in the UAE and standard lender and insurer practice on this market.