Mortgage buyouts and refinancing in the UAE

A mortgage buyout means a new lender pays off your existing home loan and you repay the new lender instead, usually to get a lower rate or different terms. In the UAE it is not free: the old bank may charge a capped early settlement fee, and the new mortgage needs a valuation and registration.

Key takeaways

• A buyout replaces your current home loan with a new one, from another bank or sometimes from the same bank on new terms.
• The old bank's early settlement fee is capped by the Central Bank at 1% of the outstanding balance or AED 10,000, whichever is less.
• In Dubai you need a no-objection certificate (NOC) from your current bank, and the new mortgage is registered with Dubai Land Department (DLD) at 0.25% of the loan.
• Switching pays only if the monthly saving recovers the costs before you sell or settle: divide the costs by the saving to find the break-even in months.
• The new lender assesses you again as a new borrower, so approval is not guaranteed.

What a buyout and refinancing mean

UAE banks use the words buyout, balance transfer and refinancing loosely, and none of them is a defined product in the Central Bank rules we cite here. In practice they describe one move: replacing your current home loan with a new one. What the new loan actually is, and what it costs, is set out in the lender's Key Facts Statement, so rely on that document rather than on the label.

There are three common versions:

• Switching lender: a new bank settles your balance with the old one and you repay the new bank.
• New terms with the same bank: some lenders will offer a new rate or product to an existing customer. Whether and on what terms is the lender's own policy, so ask for the offer and its costs in writing.
• Switching with extra borrowing: a new loan larger than your old balance, to release cash. This is a bigger borrowing decision, because the lender assesses the whole new amount.

The Credit Zone is independent: we do not rank lenders or quote their rates (see about us). This guide explains the rules and the costs so you can run the numbers on your own offer. For the wider picture, start from our mortgage guides.

How a buyout works, step by step

The order and who handles each step vary by lender and emirate, so ask the new bank for its checklist. A typical sequence looks like this:

1. Ask your current bank for your outstanding balance and its early settlement fee in writing, and check your contract for any fixed-rate period.
2. Get an indicative offer from the new lender, ideally a mortgage pre-approval, and ask for its Key Facts Statement.
3. The new lender arranges an independent valuation of the property.
4. Request a no-objection certificate (NOC) from your current bank. DLD says a Dubai mortgage can move to another bank once the current bank gives one.
5. The new mortgage is registered, and the old loan is settled. When it is repaid, you receive a clearance letter from the old bank.

Outside Dubai, property is registered through each emirate's own authority with its own fee schedule, so get the fee list from the land registry where your property is.

What switching costs

Four groups of costs apply. Two are capped by the Central Bank, one is set by DLD, and one comes from each bank's own tariff.

Early settlement fee at the old bank

If you pay off your home loan early, or part of it, the old bank can charge a fee, but not more than this:

Early settlement fee cap

1% or AED 10,000

Early settlement and partial settlement fees on a home loan are capped at 1% of the outstanding balance or AED 10,000, whichever is less.

That is a ceiling, not a standard price. VAT comes on top. Our early settlement calculator works out the cap for your own balance.

Letters from the old bank

You need the NOC to move the loan and a clearance letter once it is repaid. The Central Bank caps both:

Home loan letter fee caps

AED 95 clearance letter

Home loan document fees are capped: clearance letter AED 95, NOC AED 150, liability letter AED 85.

Registering the new mortgage

In Dubai, the new mortgage has to be registered, and DLD charges for that:

Mortgage registration fee

0.25%

Dubai Land Department charges 0.25% of the mortgage value to register a mortgage.

Fixed fees are added: AED 250 for the title deed, AED 10 knowledge and AED 10 innovation, plus a service partner fee of AED 4,000 plus VAT at a trustee centre. Our guide to DLD and mortgage registration fees sets these out, including the higher fee for a provisional off-plan mortgage. DLD says the owner who pledges the property bears the mortgage costs unless both sides agree otherwise, so ask the new bank whether it will cover any of them.

Valuation and the new bank's fees

The Central Bank requires an independent valuation before a lender makes an irrevocable commitment, and the valuer must be independent of the borrower, the seller, the developer and the lending decision. The valuation fee and any arrangement fee come from the new bank's own tariff, so ask for the full fee list. Check whether quoted amounts include VAT, because Central Bank caps are set before VAT. If you are moving the loan to a different property instead, the bank's property swap administration fee is capped at AED 1,320, valuation included.

Worked example: switching an AED 900,000 loan

The rates below are illustrations, not market quotes. They show how to test any offer you are given.

Worked example

Switching an AED 900,000 home loan from 5.00% to 4.50%

We assume an outstanding balance of AED 900,000 with 20 years (240 months) left, a current reducing-balance rate of 5.00% and a new offer at 4.50%. The new loan equals the old balance, with no extra borrowing. The property is in Dubai and the mortgage is registered at a trustee centre. We use the highest amount each cap allows.

1. Early settlement fee: AED 900,000 × 1% = AED 9,000, which is below AED 10,000, so the cap is AED 9,000.
2. Letters: AED 150 NOC + AED 95 clearance letter = AED 245.
3. New mortgage registration: AED 900,000 × 0.25% = AED 2,250, plus AED 270 fixed fees (AED 250 + AED 10 + AED 10).
4. Service partner fee: AED 4,000 plus VAT.
5. Costs: AED 9,000 + 245 + 2,250 + 270 + 4,000 = AED 15,765, plus VAT.
6. Instalment at 5.00% over 240 months: about AED 5,940. At 4.50%: about AED 5,694. The saving is about AED 246 a month.
7. Break-even: AED 15,765 ÷ AED 246 ≈ 64 months.

Item	AED
Early settlement fee (maximum)	9,000
NOC and clearance letter (maximum)	245
DLD registration and fixed fees	2,520
Service partner fee	4,000 + VAT
Costs before valuation and new bank fees	15,765 + VAT
Monthly saving	about 246

On these assumptions, the switch needs about 64 months, a little over five years, of lower instalments to recover its own costs.

The true break-even is longer, because the sum leaves out VAT, the valuation, the new bank's fees and any DLD charge for releasing the old mortgage, which we have not confirmed from DLD's pages, so ask your bank or trustee centre. It could be shorter if the old bank charges less than its cap. The instalments use the standard reducing-balance formula; you can test your own figures in the loan payment calculator.

Fixed periods and when switching pays

Check what kind of rate you have now and what kind you are being offered. If your current loan is in a fixed period, ask the bank in writing what settling early in that period would cost, and compare that with the saving. Our guide to fixed vs variable rate mortgages explains the options, including a fixed rate for the first years that then becomes variable.

A headline rate is only the start. A variable rate is a benchmark plus the lender's margin, and it moves at each reset date, so a low starting rate does not guarantee a lower rate later. EIBOR explained shows how the benchmark feeds into the rate. When you compare offers, set the margin, any minimum rate and the reset terms side by side, and ask how long any introductory or fixed rate lasts.

Then compare the break-even in months with the time you expect to keep the loan. If you may sell or settle before the break-even date, the switch is unlikely to pay for itself.

What the new lender will check

A new lender treats you as a new borrower. It will look at your income, your existing debts and your credit report, and it will lend against its own valuation, so ask how it applies its loan-to-value limit to the new valuation. It helps to check your AECB report first, so that any error can be fixed before a bank sees it.

Your situation changes the limits:

• Residents on an expat visa should read our guide to mortgages for expats for the Central Bank's loan-to-value, term and debt-burden limits.
• Non-residents face different limits, covered in mortgages for non-residents, which also notes a published programme that includes buy-outs and refinancing.
• If the property is still off-plan, a loan on it is registered provisionally and the maximum loan-to-value is 50%, regardless of purpose, value or buyer type. See financing off-plan property.

Your rights before you sign

Every new loan carries its own paperwork, so treat a buyout as a fresh borrowing. Before you commit, the lender must give you a Key Facts Statement:

Key Facts Statement

Before you sign

Lenders must give a Key Facts Statement before providing a financial product; it should be the first document in the sales process, and the consumer signs to acknowledge receiving it before signing the contract.

Our guide to the Key Facts Statement shows where the rate, fees and warnings appear, and your rights as a borrower covers the rest of the Central Bank's standards. Compare the Key Facts Statement of the new loan with your current contract line by line before you ask your bank for the NOC.

This guide explains the rules; it is not a recommendation to switch. Whether a buyout suits you depends on your contract, your offer and your plans for the property.