Mortgage Refinancing
Replacing your existing mortgage with a new one, typically to get a lower rate, release equity, or change terms.
What is Mortgage Refinancing?
Mortgage refinancing means paying off your existing mortgage with a new one from a different bank (or sometimes the same bank). People refinance to get a lower interest rate, change from variable to fixed rate, extend or shorten the tenure, release equity (cash-out refinancing), or consolidate debts. The new bank pays off your existing mortgage and creates a new loan on updated terms.
Mortgage Refinancing in the UAE
Refinancing is increasingly popular in the UAE as borrowers realize they can save significantly by switching banks. Key costs include: early settlement penalty (up to 1% of outstanding balance, capped at AED 10,000 per UAE Central Bank rules for variable rates), new bank processing fee (typically 1% of loan), property valuation fee, and mortgage registration with the Land Department. Mortigo's AI calculates the break-even point to ensure refinancing benefits you.
Worked Example
Current mortgage: AED 1,800,000 outstanding at 5.5% with Bank A. New offer: 4.2% with Bank B. Monthly saving: AED 1,350. Early settlement penalty: AED 10,000. Processing fee: AED 18,000. Valuation: AED 3,000. Total cost: AED 31,000. Break-even: 23 months. Over remaining 20 years, you save AED 293,000.
When should I consider refinancing?
When rates have dropped by 0.5% or more since your original mortgage, when your fixed period is ending, or when your property has appreciated (improving your LTV). Mortigo monitors the market and alerts you to refinancing opportunities.
What is the early settlement penalty in the UAE?
For variable rate mortgages, the UAE Central Bank caps early settlement at 1% of outstanding balance or AED 10,000, whichever is lower. Fixed rate penalties can be higher and are set by each bank.