Mortgage Loan Refinance in UAE

Refinancing is a powerful tool through which you can replace or adjust your current loan with lower interest rates, EMIs, and tenure. It allows you to pay off a loan sooner and helps you save a significant amount of money.

Before you consider refinancing your home loan, there are several things that you should understand:

• Pros and cons of refinancing
• How to compare refinance home loans

What is Mortgage Loan Refinance?

Mortgage refinancing is a strategy used by borrowers to replace an existing mortgage with a new loan. The process is used to change the repayment schedule, loan tenure, interest rate, loan amount, or more.

In this process, you borrow money from a different lender and use it to repay the existing loan. You can then make monthly payments to the new lender at lower interest rates and with better repayment options.

Whether your goal is to shorten your loan tenure or to save money, refinancing is a valuable option to consider.

When Can You Refinance a Home Loan?

There are many situations where you need to refinance housing loan:

• When you get an option to move to a lower interest rate, you can take a new loan
• If you want to switch from a fixed interest rate to a floating or adjustable interest rate, you can choose the refinancing option
• Refinance housing loans can also be used for loan consolidation
• It helps you pay off your existing loan sooner or reduce the loan tenure. If you want to reduce the monthly EMIs, you can go with the refinance option
• When your credit score is improved you get better loan term options

How to Refinance Your Mortgage?

Here are the simple steps to refinance your mortgage:

• Start with thorough research and compare refinance home loan interest and fees by different lenders to find the best options.
• Choose the one offering better loan options with lower interest rates, EMIs, and tenure. 
• Get pre-approval by submitting the application form and supporting documents required by the lender. 
• After the new loan approval, you will need to sign the documents and pay the closing fees. 
• Once the process is complete, your existing loan will be paid off and you will begin payments for the new loan. 

Pros and Cons of Mortgage Loan Refinance

The pros and cons of refinancing are listed below:

Pros	Cons
Lower interest rates Lower monthly payments  Reduce loan tenure  Pay off the loan sooner  Get access to home-equity  Save money  Eliminate private mortgage insurance	May need to pay refinancing fees May charge prepayment penalties May increase monthly payments or loan tenure (vice versa) May end up in more debt

Documents Required for Refinancing in the UAE 

The following documents are required for mortgage loan refinance:

• Valid Passport 
• Emirates ID copy
• Income proof
• Proof of assets and debts
• Mortgage application
• Property Appraisal
• 3 months bank statement
• Liability letter (if applicable)

NOTE: You may need to submit additional documents if requested by the bank or financial institutions. 

Refinance Mortgage Rates

When taking out a new loan, it’s essential to be aware of the different charges associated with it in the UAE:

• Property Valuation Fees: This can range between AED 2500 - AED 3000, including VAT.
• Settlement Fees by the Existing Bank: Different banks charge different settlement costs, generally, you need to pay AED 10,000 or 1% of the value of the mortgage set by the Central Bank of the UAE.
• Mortgage Registration Fees: It is usually 0.25% of the mortgage value.
• Mortgage Re-registration Fees: It’s around 0.25% of the mortgage value (along with an additional amount of ~AED 300).
• Mortgage De-registration Fees: Approx. AED 1590
• Mortgage Registration Trustee Fees: AED 2,000 + AED 100 + 5% VAT, if the property value is less than AED 5,00,000.  AED 4,000 + AED 200 + 5% VAT, if the property value is more than AED 5,00,000.

Note: In Dubai, these fees are submitted to the Dubai Land Department (DLD).

Pro Tips for Refinance

Ready to refinance your mortgage? Here are some essential tips to guide you on your journey:

✅Define your Financial Goals

✅Evaluate the Pros and Cons

✅Know the Costs

✅Consider the loan tenure and EMIs 

✅Calculate Associated Costs

✅Improve Your Credit Score

🌟 Define Your Financial Goals: Start with a clear vision of what you want to achieve— lowering your monthly payments, shortening your loan term, or accessing cash for other needs. 

⚖️ Evaluate Pros and Cons: Take a moment to weigh the benefits against the potential downsides. 

💰 Know the Costs: Familiarize yourself with all fees associated with refinancing, from application costs to closing fees. 

📅 Consider Loan Tenure and EMIs: Think carefully about how the length of your loan affects your monthly payments. Shorter terms mean higher payments, while longer terms can ease your burden.

🔍 Calculate Associated Costs: To make a well-informed decision, take the time to calculate all related expenses.

📈 Improve Your Credit Score: If you want to refinance on better terms, you need to improve your credit score.

Frequently Asked Questions