I bought an apartment in Dubai Marina a few years ago but looking at my paperwork it seems I am paying a higher interest rate on my mortgage than those I see advertised. Do Dubai banks allow people to remortgage and, if so, is this an option without paying a great deal of money? CD, Dubai
It is certainly possible to remortgage, to change lender, provided there is sufficient equity in the property. For an expat, the maximum loan to value on a property valued at up to Dh5 million is 75 per cent, although Emiratis can borrow up to 80 per cent. The first step is to approach the current lender, point out that the rate being paid is uncompetitive and ask for a reduction. As it is good business practice to retain good customers, you may get a reduction, especially as rates have fallen in the past few years, and I have known this to happen in a number of cases. If you decide to remortgage, note that the lender can charge a fee for repaying the mortgage early. The Central Bank has officially limited the redemption penalty that any lender can charge and this supersedes any existing mortgage contracts. The penalty can be no more than 1 per cent of the loan amount, or Dh10,000, whichever is lower. There are other costs when remortgaging including the lender’s arrangement fee, of 0.5 per cent to 1 per cent and a valuation fee to the amount of Dh2,500. It is important to confirm all the charges up front to ensure it is worthwhile changing lender.
Keren Bobker is an independent financial adviser and senior partner with Holborn Assets in Dubai, with over 20 years’ experience. Contact her at keren@holbornassets.com. Follow her on Twitter at @FinancialUAE
The advice provided in our columns does not constitute legal advice and is provided for information only
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