FAQs About Mortgages

If you go with a fixed-rate mortgage this is the period where your mortgage rate will be fixed for an agreed-upon period. Once the intro rate period expires the variable rate will kick in.

It is a property insurance policy that covers losses or damages to a mortgaged property. It is also known as fire insurance in Islamic banking.

If a borrower passes away or is permanently disabled the life insurance will kick in to pay off the outstanding mortgage balance.

A variable-rate mortgage is a loan where the interest rate of the loan is variable from the start. The value of the variable rate is determined by referencing a benchmark rate. In the UAE EIBOR is used as a benchmark to determine the variable rate. E.g. Variable rate = 3Month EIBOR rate + 2% markup. I.e. if the 3Month EIBOR rate is 0.4% then the variable rate will be 2.4%. Usually, the variable rate is determined by referencing the benchmark rate on the day the repayment is calculated.

A fixed-rate mortgage is a loan where a specific interest rate is applied for a portion of the loan tenor. In the UAE it is common to see fixed-rate mortgages where interest rates are fixed for 1-5years. After the fixed-rate tenor of the loan expires a variable rate formula will kick in. E.g. 2.5% fixed for 3 years, thereafter 2.1%+3Month EIBOR.

After your fixed-rate period is up, the agreed-upon variable rate will kick in. When a high variable rate kicks in it is common to see borrowers using a buyout refinancing deal with another bank to possibly look for better rates with a different bank. If your variable rate has kicked in contact us, and we can help you set up a great buyout deal.

These are costs associated when a title of a property is transferred seller to the buyer, in the UAE closing costs usually include a land department fee, property registration fee, real estate agency fee, property valuation fee, and mortgage registration fee.

The bank charges a penalty fee if a borrower settles the complete mortgage loan earlier than the stipulated tenor in the mortgage contract. This penalty is designed to minimize lost interest revenue due to early settlement for the bank on the mortgage loan. Central Bank of UAE regulations caps the fee at 1% of the amount replayed early with a maximum of AED10,000.

Property insurance is unique for the mortgage product or the bank you go with. Depending on the product you may be covered by a bank's group policy or you may be required to pay separately. Your mortgage proposal and contracts will specify the property insurance requirement.

Life insurance is compulsory to obtain a mortgage in the UAE.

Closing costs can total up to 5-7% of the property value for new purchases.