Monday, May 27, 2024

Smart Moves: Why UAE Homeowners Should Choose a 1-Year Fixed-Rate Refinance?


If you own a home in the UAE and are paying off a mortgage, it’s time to consider a smart strategy for the next year. By refinancing your loan with a fixed one-year term, you can likely reduce your monthly mortgage payment.

Here’s how it works: 

UAE banks are offering competitive terms for refinancing requests, especially for those with variable rates. If you’ve felt the impact of the 11 interest rate hikes by the US Federal Reserve since March 2022, a one-year refinance option might be the solution.

For example, someone with a Dh1 million mortgage could be paying Dh2,000-Dh2,500 more per month in 2023 alone due to rate hikes. This burden grows with higher mortgage amounts, and your income may not have kept pace with these increased payments.

Consultants advise homeowners to take advantage of the willingness of UAE banks to offer fixed-year rate benefits. Choosing a one-year refinance deal is preferable to getting into a variable rate scenario of 7-7.5 per cent.

What’s the reason to consider refinancing at this time?

 The US Federal Reserve has indicated that a rate cut may not happen as soon as expected. With this uncertainty, UAE property owners should prioritize reducing their monthly payments.

Another benefit is that a new refinance deal provides homeowners with lower loan installments for the next 12 months. When this period ends, they can enjoy the advantage of reduced interest rates as soon as the Federal Reserve starts cutting them.

It’s a win-win situation.

Now, the question arises: Is it better to switch to a new bank or stay with your current one? Refinancing deals often involve a new bank taking over your mortgage, but many banks are actively promoting favorable refinancing terms. Staying with your current bank might even lower additional costs for homeowners, as banks don’t want to lose clients.

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