The Biggest Misconception About Mortgage Approvals
Many buyers believe mortgage approvals are based on personal judgment.
When an application is reduced or declined, many buyers respond emotionally:
- “The bank rejected me.”
- “My profile isn’t strong.”
- “They didn’t trust me.”
However, mortgage approvals are not based on personality, relationships, or personal impressions.
They are determined by financial formulas, most of which are not visible to borrowers.
Understanding these formulas is essential, whether you use a mortgage calculator, apply through a bank, or work with a broker in the UAE.
What Is a Mortgage?
Before proceeding, let’s clarify the basics.
A mortgage is a secured home loan provided by a bank or financial institution to help you purchase property.
The property itself acts as collateral until the loan is fully repaid.
Key mortgage components include:
- Loan amount
- Interest rate
- Tenure
- Monthly repayment (EMI)
Many buyers use home loan or mortgage calculator UAE tools to estimate repayments, but these calculators only provide basic figures.
Actual approvals depend on more complex underwriting formulas.
Mortgage Meaning vs Mortgage Reality
The basic mortgage meaning suggests:
If you earn enough and can repay, you will be approved.
However, underwriting considers much more than income.
Banks evaluate a range of structured risk variables, not just salary.
This is why two buyers with the same income can receive very different approval outcomes.
Approvals are based on objective criteria, not personal factors.
The Core Formula Behind Mortgage Approvals
Each bank uses internal underwriting models, but most follow similar frameworks.
Below are the key formulas that borrowers typically do not see:
1️⃣ Debt Burden Ratio (DBR)
This is the primary approval criterion in the UAE.
DBR measures how much of your income is already committed to liabilities.
Formula:
Total monthly liabilities ÷ Monthly income × 100
Most UAE banks cap DBR at 50%.
Example:
- Salary → AED 20,000
- Existing loans → AED 6,000
Max allowed total liabilities → AED 10,000
Therefore, the maximum mortgage EMI allowed is AED 4,000.
Even if you request a higher loan, the system will not exceed this cap.
2️⃣ Loan-to-Value Ratio (LTV)
LTV determines how much of the property value the bank will finance.
Typical UAE structure:
- First property → Up to 80% financing
- Second property → Lower LTV
- Off-plan → Different caps
If a property is valued lower than the purchase price, your approval amount reduces automatically.
Again, this process is formula driven.
3️⃣ Income Weightage Formula
Not all income is treated equally.
Banks categorize earnings into:
100% counted
- Fixed salary
Partially counted
- Commission
- Bonuses
- Overtime
Example:
Salary → AED 15,000
Commission → AED 10,000
Bank may count only 50% commission → AED 5,000
Therefore, eligibility is calculated based on AED 20,000, not AED 25,000.
This adjustment applies regardless of your actual earning capacity.
4️⃣ Mortgage Affordability Calculations
When you use a mortgage calculator or UAE mortgage calculator, you see estimated EMIs only.
But banks run internal affordability stress tests, including:
- Interest rate buffers
- Future rate hikes
- Tenure caps based on age
- Minimum residual income
Therefore, calculator outputs do not represent final approvals.
Why Mortgage Calculators Don’t Show Approval Reality
Online tools like a home loan calculator are useful for planning, but they simplify underwriting.
They don’t account for:
- Employer risk grading
- Industry stability
- Credit score buffers
- Banking conduct
- Property liquidity
This is why buyers often receive pre-approval amounts that are lower than calculator estimates.
The calculator shows capacity.
The bank approves a risk-adjusted capacity.
Property Risk Also Enters the Formula
Mortgage approvals are asset-backed, so the property itself is important.
Banks evaluate:
- Developer reputation
- Project completion stage
- Resale demand
- Location strength
A high-risk property can reduce your approval amount, even if your income is high.
Automation in Modern Mortgage Approvals
Today, many banks use automated underwriting systems.
These systems instantly analyze:
- Credit bureau data
- Account conduct
- Salary transfers
- Existing exposure
- Employer category
Human underwriters review cases, but system-generated risk flags heavily influence final decisions.
This process makes approvals even more mechanical.
What Buyers Should Do Instead of Taking It Personally
Once you understand that approvals are formula-driven, you can prepare more strategically.
Before applying:
- Close small liabilities
- Reduce credit card
- Stabilize commission income records
- Avoid job changes
- Get pre-approval clarity
Preparation aligned with these formulas significantly improves approval outcomes.
The Role of Mortgage Brokers in Formula Structuring
Mortgage brokers do not change bank formulas; instead, they structure your case to fit these requirements.
This includes:
- Bank selection based on profile
- Income positioning
- Liability restructuring
- Property eligibility guidance
Expert advice can help you navigate these mechanical systems more effectively. That is what we do at Capital Zone Mortgage.