Revert rates and what to consider

 

When taking a mortgage in the UAE, understanding the revert rate mortgage is crucial. Many homebuyers focus on introductory or promotional rates offered by banks, but what happens once the offer period ends? This is where the revert rate comes into play, and it can significantly affect your monthly repayments.

In this guide, we’ll explain what a revert rate mortgage is, how it works in the UAE, compare rates across banks, provide examples of repayments, and share tips to manage the transition from the introductory rate.

What is a Revert Rate Mortgage?

A revert rate mortgage is the interest rate that applies to your home loan after the expiry of an initial discounted or fixed-rate period. Essentially, it’s the standard rate your bank charges once the promotional period ends.

For example, a bank may offer an introductory rate of 2.5% for the first 2 years on a 25-year mortgage. After two years, the rate automatically reverts to the bank’s standard rate—commonly higher—unless you renegotiate or refinance.

How Revert Rates Work in the UAE

Banks in the UAE typically structure mortgage products with two phases:

1. Introductory or discounted rate period – Usually between 1–3 years. This period offers lower interest to attract borrowers.

   
   
   

2. Revert rate phase – The interest rate after the promotional period. This is often tied to the Emirates Interbank Offered Rate (EIBOR) plus a margin.

The difference between the introductory rate and the revert rate can be substantial. If borrowers are not prepared, they may see a sharp increase in monthly repayments.

Typical Revert Rates for UAE Mortgages

Here’s a table comparing some typical introductory and revert rates for leading UAE banks:

Tip: Always check both the promotional and revert rates when comparing mortgages to avoid surprises later.

Examples: Monthly Repayments Before and After Revert Rate

Let’s consider a 2,000,000 AED mortgage over 25 years:

•Introductory rate 2.5% → Monthly repayment ≈ AED 8,970

•Revert rate 4.25% → Monthly repayment ≈ AED 10,850

That’s almost a 21% increase in monthly payments after the introductory period.

Planning ahead for this increase is crucial to maintain financial stability.

Pros and Cons of a Revert Rate Mortgage

Pros:

• •Lower initial payments during the introductory period.
  
  
• •Easier to qualify due to lower initial EMI burden.
  
  
• •Time to plan finances before the standard rate kicks in.
  
  

Cons:

•Revert rate is often higher, leading to a sudden increase in monthly payments.

•May be linked to variable rates like EIBOR, which can fluctuate.

•Refinancing or renegotiating may involve fees or penalties.

Tips to Manage Your Revert Rate Mortgage

1. Plan your budget – Ensure your monthly income can cover repayments at the higher revert rate.

   
   

2. Track EIBOR trends – If your mortgage is tied to EIBOR, monitor fluctuations that may increase your repayments.

   
   

3. Consider refinancing – Before the promotional period ends, check if you can refinance to a lower revert rate or a fixed-rate option.

   
   

4. Maintain a financial buffer – Set aside extra funds to absorb any sudden increases in repayment amounts.

   
   

5. Negotiate early – Some banks may offer an option to fix or reduce the revert rate if requested before the promotional period ends.

Frequently Asked Questions (FAQs)

Q: Can I avoid the revert rate?

A: Not entirely, but you can refinance your mortgage, switch banks, or negotiate a new deal before the promotional period ends.

Q: How often do revert rates change?

A: Revert rates are typically fixed for the duration post-introductory period but may be tied to EIBOR, which fluctuates monthly.

Q: Is the revert rate always higher than the introductory rate?

A: Usually, yes. The introductory rate is designed to attract borrowers and is lower than the standard revert rate.

Q: Can I refinance during the revert rate period?

A: Yes, but consider early repayment penalties or processing fees that may apply.

Key Takeaways

• •The revert rate mortgage is a standard interest rate applied after the promotional period.
  
  
• •Monthly repayments can rise significantly, so always plan your finances accordingly.
  
  
• •Use online tools to calculate your potential repayments at the revert rate.
  
  
• •Explore refinancing or fixed-rate options to manage long-term affordability.
  
  

Understanding the revert rate mortgage is crucial for anyone looking to buy property in the UAE. By preparing ahead, monitoring rates, and budgeting carefully, you can avoid unexpected financial stress and make your mortgage work for you.

Click here to calculate your monthly repayments and borrowing costs.