Absolutely. This is not only possible but also a very common and strategic financial move in the UAE. It’s known as a mortgage refinance or a balance transfer.
The goal is to replace your existing mortgage with a new one from a different bank that offers a lower interest rate or better terms, ultimately saving you money.
1. A new bank pays off your existing mortgage: The new lender you apply to will disburse funds directly to your current bank to settle the outstanding loan amount in full.
2. You get a new loan agreement: You then start making monthly payments to the new bank under the new, more favorable terms.
3. The lien is transferred: The mortgage registration on the property at the Dubai Land Department (DLD) is switched from your old bank to the new one.
• Lower Monthly Payments: A lower interest rate is the primary reason to refinance, as it reduces your monthly installment.
• Access to Equity (Cash-Out Refinance): If your property has increased in value, you can refinance for a higher amount than your current loan and receive the difference in cash. This can be used for home renovations, investments, or other expenses.
• Change Loan Terms: You might want to switch from a variable to a fixed rate for stability, or adjust your loan tenure.
The new bank will assess you as if you are applying for a new mortgage. Key criteria include:
• Loan-to-Value (LTV) Ratio: The maximum you can borrow is still based on the UAE Central Bank’s rules and the current market value of your property.
o *Example: If your property is now worth AED 3M and you have an outstanding loan of AED 1.5M, your loan-to-value is 50%. For a first property, you could potentially borrow up to 80% of the value (AED 2.4M), allowing you to access AED 900,000 in cash (AED 2.4M – AED 1.5M).*
• Debt Burden Ratio (DBR): Your total monthly debts, including the new proposed mortgage payment, must still be below 50% of your gross monthly income.
• Property Valuation: The new bank will conduct a fresh valuation of your property.
• Early Settlement Letter: You must obtain this from your current bank. It states the exact amount required to fully settle your loan on a specific date, including any early settlement fees.
• No Objection Certificate (NOC): You will need an NOC from your current bank, confirming they have no objections to releasing the mortgage.
1. Check for Early Settlement Fees: Contact your current bank and ask for an early settlement figure. This is crucial because some banks charge a penalty (e.g., 1% of the outstanding loan amount or a fixed fee) if you settle the mortgage within a certain period (often 1-3 years). Calculate if the long-term savings outweigh this upfront cost.
2. Shop Around for the Best Deal: Approach other banks or use a mortgage broker to find the best refinancing offers. Compare interest rates, and processing fees.
3. Get Pre-Approval: Once you find a suitable offer, get a pre-approval from the new bank.
4. Submit a Formal Application: Provide all required documents (passport, visa, Emirates ID, salary certificate, bank statements, title deed, and the settlement letter from your current bank).
5. Property Valuation & Final Approval: The new bank will value your property and issue a formal offer letter.
6. Signing and Transfer:
o Sign the new mortgage offer.
o The new bank will coordinate with the old bank to settle the amount.
o You will go to the DLD to transfer the mortgage registration to the new bank. You will need to pay the mortgage registration fee (0.25% of the loan amount + AED 290) to the DLD.
• Property Valuation Fee: (AED 2,500 – AED 3,500) paid to the new bank.
• New Bank Processing Fee: (~1% of the loan amount, often with a cap).
• Early Settlement Fee: (Check with your current bank, could be 1% or a fixed amount).
• Dubai Land Department (DLD) Fee: (0.25% of the new loan amount + AED 290 administrative fee).
• Potential Life Insurance: You may need a new policy with the new bank.
