How a mortgage buyout works
When rates fall, or your fixed period ends and your bank moves you to a higher variable rate, another bank may offer you a better deal. In a buyout, the new bank pays off your existing loan and registers its own mortgage on the property with the Dubai Land Department.
The costs of switching
- Early settlement fee. 1% of the balance, capped at AED 10,000, paid to your current bank.
- Valuation. The new bank values the property, usually for about AED 3,000 plus VAT.
- Mortgage registration. The DLD charges 0.25% of the new loan plus AED 290.
- Arrangement fee. Up to 1% of the loan plus VAT, often waived for buyouts.
Worked example
A AED 1,000,000 balance with 20 years left, moving from 5.5% to 3.9%:
| Item | Amount |
|---|---|
| Monthly payment now | AED 6,879 |
| Monthly payment after switching | AED 6,007 |
| Switching costs | AED 15,940 |
| Break-even | About 18 months |
With a three year fixed rate, the switch pays for itself halfway through the fixed period. The full term saving shown in the calculator assumes both rates stay the same, which they rarely do, so focus on the break-even time.
Frequently asked questions
What is a mortgage buyout in the UAE?
It means moving your existing home loan to a new bank, usually for a lower rate. The new bank pays off your old loan and you start repaying the new one.
What does switching banks cost?
Expect the early settlement fee to your current bank (1% of the balance, capped at AED 10,000), a valuation fee of around AED 3,000 plus VAT, the DLD mortgage registration fee of 0.25% plus AED 290, and sometimes an arrangement fee.
When is a buyout worth it?
When the monthly saving pays back the switching costs well before your new fixed period ends. If it takes three years to break even on a two year fixed rate, it probably is not worth it.
Will the new bank cover the fees?
Many banks offer to cover valuation or registration costs, or a cash incentive, to win buyout customers. Always ask, and compare the full cost, not just the rate.