Simplifying mortgages: What are the different types of mortgage lenders in the UAE?

Got a mortgage on your mind?

You might have a set of questions on hand, and as confusing as they may seem, mortgages are actually quite simple!

A question we commonly are asked at Allsopp & Allsopp Mortgage Brokers is - What are mortgage lenders, and what are the different types of mortgage lenders?

In Dubai, it's not common to shop for mortgage lenders, as usually, banks are the ones registered with the Dubai Land Department to provide you with mortgages. Brokers, on the other hand, are the ones who can help fund a mortgage, acting as middlemen between the investor and the bank.

Even then, it is still beneficial to keep updated on the different types of mortgage lenders and how they can differentiate from mortgage types.

What is a mortgage lender?

In simple terms, a mortgage lender is a financial institution or mortgage bank that offers and underwrites home loans.

Lenders usually have specific borrowing guidelines to verify your creditworthiness and ability to repay a loan. A mortgage broker is someone who works between you and your lender - somewhat as a middleman.

Mortgage brokers can help save you time and effort by communicating with banks to find a lender that's suitable. If you need a loan with a low down payment requirement or your credit is not so pristine, brokers can look for lenders that offer loans best suited to your needs.

What are the different types of mortgage lenders?

There are six different types of mortgage lenders that are crucial to know about as they can help you when discussing potential loans with your mortgage broker.

Retail lenders

These lenders usually include banks, credit unions or mortgage bankers under their radar.

Retail lenders offer a loan that is curated to meet the financial needs of individuals rather than businesses. Banks provide this loan to you if you want to make some immediate purchases but do not have the required funds for it, then you can go in for retail loans.

This is determined by checking your credit score, and on the basis of your credit and bank history, you will be given a loan up to a certain amount.

Direct lenders

These lenders usually originate their own loans by either using their own funds or borrowing them from elsewhere.

Mortgage banks and portfolio lenders can be direct lenders. What distinguishes a direct lender from a retail bank lender is the specialisation in mortgages.

Direct lenders on most parts work online or have limited branch locations - this is a potential drawback if you prefer face-to-face interactions. Middlemen or intermediaries are not usually involved in the process, so interest can be higher.

Portfolio lenders

Portfolio lenders usually fund borrowers with their own money, and they set an interest rate that lenders have to return to them.

These lenders can be anyone, from corporate lenders to private lenders. Borrowing guidelines and terms are set by portfolio lenders themselves, which may appeal to certain borrowers, but sometimes don’t appeal to many due to the high interest rates.

However, one of the biggest key takeaways for opting for portfolio loans is that they offer more flexibility underwriting standards and are faster in funding than conventional loans.

Wholesale lenders

Wholesale lenders are banks or other financial institutions that offer loans through third parties, such as mortgage brokers, other banks or credit unions. Wholesale lenders don’t work directly with consumers but originate, fund and sometimes service loans from elsewhere.

In Dubai, you would see that a majority there are wholesale lenders, and banks and mortgage brokers are the right people to go to!

Correspondent lenders

A correspondent lender is a financial institution that originates and funds home loans using its own funds. Unlike mortgage brokers who act as intermediaries between borrowers and lenders, correspondent lenders directly underwrite and fund loans, often using their own underwriting guidelines.

Correspondent lenders usually sell mortgages to investors (also called sponsors) who re-sell them to other potential investors on the secondary mortgage market.

Warehouse lenders

Warehouse lenders help other mortgage lenders fund their own loans by offering short-term funding.

Warehouse lenders use the mortgages as collateral until the borrower repays them. Warehouse lines of credit are usually repaid as soon as a loan is sold on the secondary market.

Found this helpful?

A majority of borrowers go through mortgage brokers in the UAE, which may be different from the processes in other countries. If you have any other queries or need any clarifications, you can get in touch with our Head of Mortgages; Stuart Roe.

Mortgages in the UAE are also available to non-residents. Take a look at our guide to mortgages for foreign investors in the UAE to find out all the key information you need to know.

And if you’re keen to know more about how much your mortgage could round up to monthly - take a look at our mortgage calculator.