How to Switch Banks & Buy Out Your Mortgage
Introduction: Why 2025 is the Year of Smarter Mortgage Moves
The UAE mortgage market in 2025 is seeing a wave of homeowners taking control of their finances. With the U.S. Federal Reserve signaling another rate cut and local banks adjusting their EIBOR-linked home loans, mortgage rates in the UAE are at some of the lowest levels in years.
As of October 2025, fixed mortgage rates are hovering between 3.75% and 4.50%, depending on tenure and profile. That’s a major drop from the 6–7% levels many borrowers were paying in 2022–23. Naturally, this has led to a surge in mortgage buyouts — a process where you transfer your existing loan from one bank to another to take advantage of lower interest rates or better terms.
For many homeowners, this isn’t just about saving a few hundred dirhams per month — it’s about long-term financial optimization, freeing up liquidity, and managing debt strategically.
What Is a Mortgage Buyout?
A mortgage buyout (also known as loan transfer or refinancing) allows you to move your existing home loan from your current bank to another that offers better interest rates, flexible repayment terms, or added features like offset accounts and repayment holidays.
Essentially, the new bank “buys out” your remaining loan amount from your current lender. You start repaying under the new terms, often at a lower rate.
In the UAE, mortgage buyouts have become increasingly popular as banks compete to attract qualified borrowers with competitive rates and lighter fee structures.
Why UAE Borrowers Are Switching Banks in 2025
1. Falling Mortgage Rates
The UAE’s mortgage rates have steadily declined through 2024 and 2025 as global inflation eased. Borrowers who were locked into 6–7% loans are now eligible for new rates around 3.75%–4.25%, depending on loan-to-value (LTV) ratio and credit profile.
2. Flexible Fixed and Variable Options
Banks now offer attractive fixed-rate packages (2–5 years) and EIBOR-linked variable rates. Borrowers can also hybridize — fixing a part of their tenure and floating the rest.
3. Lower Early Settlement Caps
Per UAE Central Bank guidelines, early settlement (exit) fees are capped at 1% of the outstanding balance or AED 10,000, whichever is lower — making switching far more feasible.
4. Improved Customer Experience
Banks are simplifying buyout documentation, offering valuation reimbursements, and even waiving processing fees for high-credit borrowers.
How the Mortgage Buyout Process Works in the UAE
Switching banks may sound complex, but with proper guidance, it’s quite straightforward. Here’s the step--step process:
Step 1: Assess Your Current Loan
Review your current interest rate, balance, remaining tenure, and any applicable early-settlement penalties.
Step 2: Compare Market Offers
Consult a mortgage advisor like Ricadi Mortgages to compare rates, hidden fees, and eligibility across banks. The goal is to ensure your total savings outweigh the switching cost.
Step 3: Get a Buyout Offer from the New Bank
Once you submit documents (Emirates ID, passport, salary certificate, bank statements, and property title deed), the new bank will issue a conditional offer outlining your new rate and terms.
Step 4: Clearance from Existing Bank
Your new bank sends a buyout request letter to your current bank, asking for a liability certificate or clearance letter.
Step 5: Property Valuation
A third-party valuer assesses your property to confirm its market worth — usually costing AED 2,500–3,500.
Step 6: Final Documentation and Settlement
After approvals, your new lender settles the outstanding amount directly with your current bank. You then sign the new loan agreement.
Step 7: Mortgage Registration
The final step is registering the new mortgage with the Dubai Land Department (DLD) or relevant emirate authority, which costs roughly 0.25% of the loan amount + AED 290. Trustee office fees add AED 4,200–5,000.
Fees & Costs Involved in a Buyout
Even though you’re saving on interest, switching does involve some upfront costs. Here’s a realistic breakdown (as of Q4 2025):
| Fee Type | Typical Range |
| Bank Processing Fee | 0.5% – 1% of loan amount |
| Valuation Fee | AED 2,500 – 3,500 |
| DLD Mortgage Registration | 0.25% + AED 290 |
| Trustee Office Fee | AED 4,200 – 5,000 |
| Early Settlement Fee | 1% (max AED 10,000) |
| Life Insurance (if required) | 0.25% – 0.5% of loan amount annually |
Many banks offer partial or full fee waivers during promotions, so borrowers should always negotiate before signing.
When Is a Mortgage Buyout Worth It?
A buyout makes financial sense when:
- Your current rate is at least 1% higher than new market offers.
- You have 5+ years left on your mortgage.
- You plan to stay in your property for the foreseeable future.
- You want to switch from variable to fixed (or vice-versa) for rate stability.
Example:
If your remaining balance is AED 1 million at 5.75% for 15 years and you switch to 3.99%, you could save over AED 140,000 in total interest — even after fees.
How Rate Cuts Influence UAE Mortgage Buyouts
When the U.S. Federal Reserve cuts rates, the UAE Central Bank typically follows suit, since the dirham is pegged to the dollar. This reduces the EIBOR (Emirates Interbank Offered Rate), leading to lower floating-rate mortgages.
Borrowers currently on older, high fixed-rate contracts can use buyouts to lock in lower terms — especially before the next EIBOR uptick.
Tip: A quarter-point (0.25%) drop in rate on a AED 1 million loan can save roughly AED 2,500–3,000 per year.
Common Pitfalls to Avoid When Switching Banks
- Ignoring total cost of transfer. Always calculate processing + valuation + settlement + insurance before deciding.
- Not checking insurance portability. Some banks require fresh policies, increasing cost.
- Missing hidden admin fees. Ask for an itemized fee sheet in writing.
- Switching too late. If you’re in the last few years of tenure, savings may be minimal.
- Assuming all buyouts are instant. The process can take 2–4 weeks depending on bank coordination.
How to Maximize Savings When Switching
- Time your switch strategically — right after a Fed or EIBOR rate cut.
- Choose reducing balance loans to lower effective interest.
- Negotiate processing-fee waivers.
- Opt for shorter fixed terms (2–3 years) if rates are expected to fall further.
- Work with independent advisors who can compare banks objectively.
Real-World Scenario: Why Buyout Works
Rania, a Dubai resident, took a 20-year mortgage in 2021 at 6.25%. By 2025, her outstanding balance was AED 1.2 million. She switched to a 3.99% fixed-rate package via a Ricadi-structured buyout. Her EMI dropped from AED 8,800 to AED 7,250 — saving nearly AED 1,550 per month, or AED 372,000 over the term.
How Ricadi Mortgages Simplifies the Buyout Process
At Ricadi Mortgages, the advisory team goes beyond rate comparison. They:
- Analyse your current mortgage structure.
- Calculate true break-even savings after fees.
- Identify the most favorable bank for your credit profile.
- Handle documentation, valuation coordination, and DLD registration.
- Negotiate rate and insurance terms directly with lenders.
The result: transparent, optimized, end-to-end mortgage switching with no hidden surprises.
Trending Queries Answered
Q1. Can I switch from a fixed-rate mortgage before my term ends?
Yes. Most banks allow early settlement after six months, subject to a 1% or AED 10,000 cap.
Q2. Do I need to pay new life insurance during a buyout?
Usually yes, but some banks accept existing coverage if the policy names the new lender as beneficiary.
Q3. Can I refinance an off-plan property loan?
Typically only after handover. However, some developers coordinate early buyouts upon completion.
Q4. How long does a mortgage buyout take in the UAE?
On average 10–25 business days, depending on how quickly your old bank issues a liability certificate.
Q5. Will a buyout affect my credit score?
No negative impact if payments remain consistent. In fact, lower utilization and timely payments may improve it.
Conclusion: Clarity Over Cost
Switching your mortgage bank isn’t about chasing the lowest rate — it’s about understanding your true cost and total savings. With UAE mortgage rates trending downward and banks competing for quality borrowers, 2025 offers an ideal opportunity to restructure your loan for long-term financial health.
Whether you’re looking to reduce EMIs, lock in stability, or simply ensure transparency, a well-planned buyout can help you achieve it — with Ricadi Mortgages guiding every step toward a smarter, more secure future.
