If you took your mortgage a few years ago, you may be paying more than you need to. A buyout (refinancing) moves your loan to a better rate — and thanks to a Central Bank fee cap, it's usually cheaper to switch than people think.
What a buyout actually is
In the UAE, refinancing is commonly called a buyout: a new bank pays off your current mortgage, and you carry on with them on a new loan — typically at a lower rate, or borrowing a bit more to release equity. Your old mortgage is settled and a new one is registered against the property.
The early-settlement fee is capped — and it's small
The biggest myth about switching is that exit penalties make it pointless. In fact, the Central Bank caps the early-settlement fee at the lower of 1% of your outstanding balance or AED 10,000. On a AED 1.5M balance, 1% would be AED 15,000 — but the cap means you pay no more than AED 10,000. That changes the maths in your favour.
The full cost of switching
When you weigh up a buyout, count all the costs:
- Early-settlement fee to your old bank (capped, as above).
- New bank arrangement/processing fee — often 0.5–1% of the loan + VAT (some waive it to win your business).
- Valuation fee — the new bank values the property (~AED 2,500–3,500).
- Mortgage re-registration at the DLD — 0.25% of the new loan + AED 290.
How to know if it pays off
The rule of thumb: refinancing is worth it when the interest you'll save over the time you plan to keep the loan is comfortably more than those switching costs. On a large balance, even a 1% rate reduction often covers the costs within a year or two — everything after that is saving. Model your current rate versus a new rate in the mortgage calculator to see the difference in your monthly payment.
Releasing equity
If your property has gained value or you've paid down a chunk, a buyout can also let you borrow more against it — within the Central Bank Loan-to-Value cap for your situation. Banks will usually ask what the funds are for. Remember the same affordability rules apply: the new, larger loan still has to fit inside your 50% Debt Burden Ratio after the stress test.
Check the new numbers first
Before you approach a bank, run the new rate and any extra borrowing through the eligibility calculator — it confirms the new monthly payment and whether the larger loan still fits the Central Bank rules.