Rate dropped 75+ bps since you locked
usually worth itThe classic case. On a large balance, a 0.75-1% rate cut typically recovers the switching cost within 18-24 months.
Owner guide
Mortgage refinancing guide
Refinancing can save real money or quietly cost you more. This is the honest framework: which triggers are worth acting on, the buyout vs equity-release distinction, the full switching-cost stack, and the break-even math that decides it.
Triggers worth acting on
Fixed-rate period is ending
usually worth itWhen your intro fixed reverts to a higher variable, refinancing to a fresh fixed often beats the reversion rate.
You want to release equity
sometimes worth itProperty has appreciated and you want to draw cash. Capped by the LTV ceiling for your buyer profile + DBR re-check.
Switching from Islamic to conventional (or vice versa)
sometimes worth itProduct-structure preference. Compare effective rate + early-settlement terms, not just the headline.
Consolidating into a longer tenure
rarely worth itLowers monthly payment but increases total interest. Only sensible for genuine cash-flow relief, not as a default.
Three kinds of refinance
Buyout (rate refinance)
New lender pays off your existing mortgage and you continue with their (better) terms. The most common refinance. Same loan amount, new rate/tenure.
Equity release (top-up)
Refinance for MORE than the outstanding balance, drawing the difference as cash. Limited by your LTV cap + a fresh DBR assessment. Often used for a second-property down-payment.
Internal rate switch
Staying with the same lender but moving to a better product. Avoids some buyout costs but lenders rarely offer their best rate to existing customers — always compare externally first.
The switching-cost stack
Refinancing is never free. Budget the full stack before you compare the rate saving.
| Cost line | Amount | Note |
|---|---|---|
| Early settlement fee (current lender) | 1% of balance, capped AED 10,000 | CBUAE-capped. Charged by your outgoing lender for closing early. |
| New lender processing | ≈ 1% of new loan + VAT | Origination fee on the new facility. |
| Property valuation | AED 2,500 - 3,500 | New lender requires a fresh valuation. |
| DLD mortgage re-registration | 0.25% of new loan + AED 290 | Releasing the old lien + registering the new one. |
| Life insurance (re-issue) | varies | May need a fresh policy assigned to the new lender; existing policy sometimes transferable. |
Break-even worked example
| Outstanding balance | AED 1,200,000 |
| Old rate / new rate | 5.25% → 4.25% (−100 bps) |
| Monthly saving | ≈ AED 700/month |
| Total switching cost | ≈ AED 22,000 |
| Break-even | ≈ 31 months |
| Verdict | Worth it if staying 3+ years |
The rule: if your break-even is shorter than how long you'll keep the property + mortgage, refinance. Otherwise hold.
Documents the new lender needs
A refinance is a fresh underwrite — expect a full income + liability re-check, much like the original pre-approval.
- Passport + Emirates ID + residence visa
- Existing mortgage statement + settlement-figure letter from current lender
- Title deed
- Latest salary certificate / audited financials (income re-verification)
- 6 months bank statements
- Liability letter + AECB credit report