Why now is the time to consider refinancing your mortgage

It is no secret that mortgage rates in the UAE have been falling consistently over the past year and the benefit of this for new borrowers has been covered extensively, but what about current mortgage holders? Well, the great news is that the falling rates coupled with changes in loan-to-value ratios, introduced in 2020, make refinancing (a buyout) your current mortgage a much more attractive option than ever before.

The current leading mortgage products available on the market now are all below 3%, with some products being even closer to the 2% mark – this was unheard of just over a year ago. For those who took a mortgage prior to 2020, now is a great time to investigate refinancing to get a better deal on your mortgage. With rates at current levels, it is possible to save significantly on your monthly mortgage payments, which in turn will save you thousands of dirhams in interest payments over the term of your mortgage.

Example of the possible savings

Below we have put together a typical example of the interest savings that can be made for a mortgage taken prior to 2020. The example is based on a AED 2million mortgage over a 22 year term.

Best mortgage rate in 2019
Current lowest fixed rate
Current lowest variable rate
AED 940,124AED 573,612AED 509,357

Based on the example above, this would mean a massive saving of AED 366,512 for those opting for the new fixed rates or AED 430,767 for the variable* product.

Loan-to-value ratios

For many homeowners who purchased prior to 2019, one of the main challenges to remortgaging is that the value of your property may have fallen below the original mortgage amount. Meaning you owe more than the current value of the property or very close to the original loan amount – making a remortgage less attractive or even impossible.

Although this may still be an issue for some, the changes in loan-to-value ratios introduced in early 2020 by the Central Bank of the UAE, allowing UAE nationals to borrow up to 85% and expats up to 80%, may make things easier.

Many banks have now incorporated this loan-to-value change within their remortgage (refinance) products too. This means they are allowing those who refinance their mortgages to borrow up to 80% of the current market value of their property. This offers more flexibility, especially for those who purchased a few years ago and may have seen the price of their properties fall slightly since then.

The fees to refinance cannot be ignored

It is important to remember that a remortgage does come with transfer fees, but the savings to be made on lower repayments can far outweigh the costs. You can read more about the fees in our guide to remortgaging here.

Furthermore, following updates introduced last year from the Insurance Authority as to how insurance premiums are sold, there could also be significant savings of around 65% to be made on your life insurance premiums too. This could further reduce your monthly outgoings.

For more information about refinancing your mortgage, you can read our blog here which covers the steps through the process. We have also covered this topic on the ‘Pocketful of Dirhams” podcast for The National News, you can listen to the full episode here.

Want to refinance your mortgage? We can help.

Our brokers will give you an independent and personalised mortgage recommendation to ensure you get the best product.

*Subject to EIBOR changes