Did you know that your Debt Burden Ratio (DBR) plays a crucial role in determining your loan eligibility in the UAE? Banks in the UAE have strict lending criteria, and if your DBR exceeds 50%, you might struggle to secure a mortgage or personal loan.

The DBR calculation helps financial institutions assess whether you can afford additional debt based on your income. If you’re planning to buy a property, understanding how to calculate DBR in UAE is essential. In this guide, we’ll break it down into three simple steps, share tips to reduce DBR, and explain why it matters for real estate investors and homebuyers.

Let’s dive in and learn how to assess your financial standing before applying for a home loan in the UAE.

What is DBR and its Importance Today

Debt Burden Ratio (DBR) is a financial metric used by UAE banks to evaluate a borrower’s ability to repay loans. It is the percentage of your monthly income that goes towards repaying existing debts.

Key features include:

• Mandatory for Loan Approval: UAE Central Bank regulations state that your DBR must not exceed 50% to qualify for a loan.
• Applies to All Types of Debt: Includes mortgages, personal loans, credit cards, and car loans.
• Impacts Loan Amount & Interest Rate: A lower DBR increases your chances of getting a higher loan amount at better interest rates.
• Essential for Mortgage Planning: Homebuyers and property investors must maintain a low DBR to secure favorable mortgage terms.

In short, if your DBR is too high, your loan application could be rejected, or you might receive a lower loan amount than expected.

3 Simple Steps To Calculate Your DBR Ratio

Step 1: Add Up Your Total Monthly Debt Payments

To calculate your DBR, start by summing up all your monthly financial obligations. These typically include:

• Mortgage payments (if any)
• Personal loan installments
• Car loan installments
• Minimum credit card payments (not the full outstanding balance, just the minimum due)
• Any other fixed debt obligations

For example:

• Mortgage payment: AED 5,000
• Car loan: AED 2,000
• Credit card minimum payment: AED 1,000
• Personal loan: AED 3,000
  Total Monthly Debt = AED 11,000

Step 2: Calculate Your Gross Monthly Income

Next, determine your total monthly income before any deductions. This includes:

• Salary (fixed income)
• Rental income (if applicable)
• Business income (if you own a company)
• Any additional side earnings (bonuses, commissions, etc.)

Example:

• Monthly salary: AED 25,000
• Rental income: AED 5,000
  Total Monthly Income = AED 30,000

Step 3: Apply the DBR Formula

Now, divide your total monthly debt by your total monthly income and multiply by 100 to get the DBR percentage.

DBR Formula: DBR = (Total Monthly Debt Payments/Total Monthly Income) × 100

Example Calculation: (AED 11000/ AED 30000)  × 100 = 36.67

Since the DBR is below 50%, this borrower qualifies for additional loans, such as a mortgage.

Important: If your DBR is above 50%, banks in the UAE will likely reject your loan application or offer a lower amount than requested.

5 Practical Tips to Reduce Your DBR

If your DBR is too high, reducing it should be a priority before applying for a mortgage. Here are five effective strategies:

1. Pay Off High-Interest Debts First

Credit card debt has high interest rates and significantly impacts your DBR. Pay more than the minimum due to lower the balance faster. It’s recommended to reduce your credit card limits instead of closing it since the latter could take upto 6 months to reflect on your credit report.

2. Consolidate Loans for Lower Instalments

Merging multiple loans into one with a lower interest rate reduces monthly repayments and simplifies debt management. Many UAE banks offer loan restructuring—explore these options to lower your DBR.

3. Increase Your Income Sources

Boosting your income lowers your DBR. Negotiate a raise, start freelancing, invest, or earn from rentals. More earnings mean a lower debt-to-income ratio and better mortgage eligibility.

4. Avoid Taking New Loans Before a Mortgage

New loans increase your DBR and reduce borrowing power. Avoid additional debt before applying for a mortgage and focus on repaying existing obligations.

5. Lower Your Loan Tenure for Bigger Payments Now

A shorter loan tenure means higher monthly payments but helps clear debt faster, reducing DBR. If possible, make lump sum payments or switch to a shorter tenure for better creditworthiness.

Enjoy a Seamless Mortgage Experience With My Mortgage 

If your DBR is too high, reducing existing debts, increasing your income, and making strategic financial choices can improve your chances of loan approval.

At My Mortgage, we simplify the entire home loan process for you. From instant pre-approval to securing competitive rates, our experts guide you every step of the way. We help you find the best mortgage options tailored to your financial goals, ensuring a smooth and hassle-free property financing experience. 

Ready to buy your dream home? Start your mortgage journey with My Mortgage today! 

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