Good news for all home owners! The UAE Central Bank ordered local banks to reduce early settlement fee for mortgages to a maximum of 1% or Dh10,000, whichever is less, to the borrowers who want to exit their mortgages early.
The bank also proclaimed that those borrowers who had already paid three per cent settlement fee can get the refund from their banks within 30 days.
Do you know that the early settlement fee was set at three per cent in June 2018?
But now the early settlement or partial settlement fee applying to home loans has been made to maximum one per cent of the outstanding balance or Dh10,000, whichever is less.
Banks and finance companies that used to charge the stated terms of the fees in existing customer agreements are immediately required to respect the original terms of the agreement and refund all overcharges for all customers based on their original fee within 30 days of this notice.
People are so grateful because of this consistent decline in interest rates, mortgage rates have also been going down in the UAE in line with the decline in US Federal Reserve rates.
This move is fascinating for borrowers and will encourage them to switch their mortgage to lenders offering better interest rates and result in an expansion in buyout and remortgaging activity. This move will help boost market sentiment and will result in an increase in buyout and re-mortgaging activity.
The amendment will greatly facilitate the existing mortgage borrowers with flexibility in loan liquidating/transfer decision. These reduced charges for paying off mortgages early in the UAE is a welcome change for current homeowners paying off mortgages and those interested in applying for new home loans.
This new reduced settlement fee law in the UAE applies to the early closure of home loans in Dubai and any other mortgage products offered to individual customers. Bear in mind that the rule does not apply to corporate clients of UAE banks.
Let’s have a look at some valuable insights:
If we quote Dubai Land Department figures, the UAE Central Bank’s 2018 report revealed that investment in real estate with a value of deals of less than Dh10 million in Dubai stood at Dh45.6 billion, of which Dh38.5 billion or 84.4 per cent were paid cash and Dh7.1 billion or 15.6 per cent made through a mortgage. Compared to 2017, it said cash purchases declined by 36.6 per cent, from Dh60.7 billion, while mortgage purchases dropped by 17.6 per cent from Dh8.7 billion. The fall in the amount of all investment transactions was at 34.2 per cent in 2018.
If you are keen to take advantage of these new early settlement laws in the UAE, take a detailed look at the types of mortgages available.