The 3% settlement fee that UAE Central Bank introduced in 2018, impaired competition among banks when it comes to remortgaging. Mortgage holders hardly considered switching banks due to this charge. Since then, remortgaging was mostly done within the same bank.
After having this fee revised earlier this month, UAE banks started to launch appealing remortgaging plans. Likewise, borrowers are keener on transferring their mortgage to other banks due to their better remortgaging plans.
What Has Changed with New Mortgage Fees?
Mortgage holders looking to remortgage to get a better deal on their current home loans will now have to pay a maximum fee of 1% or AED 10,000, whichever is lower. Furthermore, the update from the Central Bank also indicated that those who already paid previously required 3% settlement fee may receive a refund from their bank within 30 days. Those who fall in this category should contact their bank to see if they are eligible for this refund. It depends on how the bank implemented the previous ruling. In other words, the bank had to prove a financial loss to charge the full 3%, what many of them didn’t do.
The Right Time for Remortgaging
Actively reviewing your mortgage rate and remortgaging can significantly reduce your costs. With the new changes regarding settlement fees, many banks are offering competitive mortgage products to attract new customers. Therefore, this is an ideal time to review your mortgage and get a better deal; either from your bank or from the competitor. If your property is under a mortgage, it is sure worth looking into it.
How Will This Affect Real Estate?
Previous settlement fee made many borrowers stuck with their existing loan affecting their disposable income. Furthermore, they were keener on investing in Dubai off-plan projects offering an attractive payment plan; rather than in ready properties which involved taking on another mortgage. Past regulations mainly affected investors. They were facing a decrease in their return on investment due to unrevised mortgage costs.
To sum up, the newest ruling will surely have a positive impact on Dubai’s secondary real estate market, having in mind that investors’ and end-users’ selling costs will significantly reduce.