Fixed vs Variable Mortgage: 7 Key Differences Every UAE Buyer Should Know

If you’re planning to buy a property in the UAE, one of the biggest decisions you’ll face is choosing between a fixed vs variable mortgage. It might sound technical, but this decision can impact how much you pay every month — and how much you save in the long run.

In this guide, we’ll explain the key differences, show you real examples, and help you figure out which type of mortgage suits your needs.

What Is a Fixed Mortgage?

A fixed mortgage has a set interest rate that stays the same for a defined period — typically 1 to 5 years in the UAE.

 Example:

– You choose a 3-year fixed rate of 4.25%

-Your monthly payment remains unchanged during those 3 years

-After the fixed period ends, the rate usually switches to a variable rate based on the market

 Best for:

-People who want payment stability

-Budget-conscious buyers

Those who believe rates may rise

EIBOR, or the Emirates Interbank Offered Rate, is a daily rate published by the UAE Central Bank. It is based on the average interest rates offered across all banks in the UAE within a particular period, excluding the two highest and two lowest rates. The EIBOR periods are: overnight, 1 week, 1 month, 3 months, 6 months, 12 months.

What Is a Variable Mortgage?

A variable mortgage means the interest rate can change over time. It’s usually linked to the EIBOR (Emirates Interbank Offered Rate), which fluctuates based on economic conditions.

Example:

-You start with a rate of 3.99%

-If EIBOR increases, your rate and monthly payments go up

-If EIBOR decreases, you may pay less

 Best for:

-Buyers comfortable with some risk

-Those expecting interest rates to fall

-Investors who want early settlement flexibility

Fixed vs Variable Mortgage – 7 Key Differences

Here’s a side-by-side comparison to help you decide.

1. Interest Rate Stability

-Fixed: Guaranteed rate during the fixed period

-Variable: Can rise or fall based on EIBOR

 Choose fixed if you value predictable monthly payments.

 2. Monthly Payment Consistency

-Fixed: You know exactly what you’ll pay each month

-Variable: Monthly payments can change without warning

 Fixed gives peace of mind, especially for first-time buyers.

3. Overall Cost Over Time

-Fixed: May be more expensive upfront if rates are high

-Variable: Can save you money if rates stay low — but risky

 If you expect rates to drop, a variable mortgage could be cheaper.

4. Flexibility and Early Settlement

-Fixed: Early settlement may come with higher penalties (up to 1%)

-Variable: Usually offers more flexible terms and lower exit fees

 Variable loans are better if you plan to sell or refinance soon.

5. Rate Adjustment After Fixed Term Ends

-Fixed: Reverts to variable rate after the fixed period ends

-Variable: Already floating — no sudden change

 Know your lender’s follow-on rate before choosing a fixed deal.

6. Best Use Cases in the UAE Market

• -Fixed Mortgage:

   

  • Stable incomes (salaried individuals)

     

  • Long-term residents

     

  • Families buying for personal use

     

• -Variable Mortgage:

   

  • Investors or flippers

     

  • Buyers with lump sum income

     

  • Clients who expect falling rates

     

7. Impact of UAE Market Conditions

• – The UAE market has seen rate hikes in the past 2 years

   

• – EIBOR is still subject to international changes (linked to US Fed rate)

   

• – Fixed rates protect you from rising trends, while variable loans might benefit you when EIBOR drops

   

 Watch the market or speak to an advisor before locking in.

Which One Should You Choose?

When comparing fixed vs variable mortgage, there’s no “one-size-fits-all” answer.

Ask yourself:

• – Do I need consistent monthly payments?

   

• – Am I planning to live in the property long term?

   

• – Do I expect UAE interest rates to rise or fall?

   

• – Am I comfortable with risk?

   

 Pro Tip: In uncertain markets, many buyers choose a hybrid — a fixed rate for the first 2–3 years, then switch to variable.

Real UAE Mortgage Example (2025)

Let’s compare two buyers with a property value of AED 1,500,000 and mortgage of AED 1,200,000 (80% LTV):

Loan Type	Fixed (3 yrs @ 4.25%)	Variable (starting at 3.99%)
Monthly Payment	AED 6,487	AED 6,335 (variable)
Total Paid (3 yrs)	AED 233,532	AED 228,060 (if no rate change)
Risk	Low	Medium (if EIBOR increases)

Frequently Asked Questions

Q: Is it better to go for fixed or variable in the UAE?

It depends on your risk tolerance and financial goals. Fixed is safer; variable can save money if rates go down.

Q: Can I switch from fixed to variable later?

Yes, but you may need to refinance or wait until your fixed period ends.

Q: Are fixed rates higher than variable in the UAE?

Usually, yes — banks charge a premium for rate stability.

Q: What happens when my fixed rate ends?

You automatically switch to a variable rate unless you refinance or negotiate a new fixed deal.

Understanding the differences between fixed vs variable mortgage is key to making a smart home financing decision in the UAE. Fixed rates offer peace of mind, while variable rates offer flexibility and possible savings — but with more risk.

Not sure which mortgage type is right for you?
Contact Mortgage Finder today for a free consultation. We’ll help you compare the best fixed and variable mortgage offers across UAE banks — and guide you to the most cost-effective solution.