Opportunity to Prosperity: Navigating Mortgage Refinancing in Dubai's Investor Landscape

July 19, 2023

If you are an experienced investor in Dubai, you are already familiar with mortgage refinancing and the opportunities open. This article will examine two popular options: equity release and mortgage buyout. These financial instruments provide attractive benefits such as taking advantage of lower interest rates, keeping a fixed-rate mortgage, modifying the mortgage time frame, or releasing funds to cover various financial needs.

Equity Release: Utilizing the Power of Your Property

Consider a loan in which your home is collateral; this is precisely what an equity release entails. A bank offers a payment plan based on the loan amount you choose, with interest calculated on the principal loan. This plan can last up to 25 years, allowing you to repay your mortgage or reclaim your residence.

It is critical to remember that timely payment is necessary, as failure to do so may result in the bank or lender seizing possession of the property.


Advantages of an Equity Release Loan:

For smart investors like yourself, an equity release loan offers various benefits:

Lower Interest Rates:

Choosing a loan secured by your home generally results in lower interest rates than traditional personal loans. However, before starting with the application, ensure that the intended purpose of the loan matches the lending restrictions implemented by banks in the UAE.


Improved Liquidity:

An equity release loan can be a great option if you're considering financing a second house or another investment. By taking out this loan, you can access a large lump sum, simplifying the process of making a sizable down payment. Remember that down payments for second homes are typically higher, ranging from 35% to 50% of the property's worth.

Tax-Free Benefits:

The UAE is a financial haven; cash earned through equity release loans is tax-free. As a result, you can maximize your financial resources while avoiding tax penalties.


Criteria for Eligibility for an Equity Release Loan in the UAE:

Contrary to common belief, equity release loans are for more than just cash buyers. Lenders assess investors' eligibility based on various characteristics such as credit scores, income sources, and current liabilities. Whether you are retired, working, or self-employed, you have a decent chance of obtaining an equity release loan if your credit score is in excellent shape and you have a consistent source of income.

Remember that qualifying for the maximum loan does not obligate you to borrow the entire amount. You can choose the loan amount that best meets your needs.


Equity Release Loan Amount Limits:

In most situations, borrowers can acquire up to 85% of their property's current value through an equity release loan. However, different banks have varied terms and conditions. Non-residents may face stricter borrowing limits, such as 50% of the property value, while resident expats may face a maximum loan amount restriction of 60-80%.


Mortgage Buyout: A Pathway to Favorable Loan Conditions 

Assume you have a mortgage and are looking for lower interest rates or better conditions. In that circumstances, a mortgage buyout may be the best option. This procedure entails repaying your previous loan and replacing it with a new loan from a different bank with better terms.

Combining a Mortgage Buyout with Equity Release:

To maximise the value of your property, you can combine a mortgage buyout with an equity release. As the value of your home rises, you have access to lower interest rates, better loan terms, and the ability to obtain a larger cash payment. However, in the face of unfavorable market conditions, it is critical to have a long-term financial perspective and safeguard the stability of your finances.


Finally, by investigating mortgage refinancing, specifically Equity Release and Mortgage Buyout, you open the door to various financial opportunities in Dubai. Whether you want to lower interest rates, enhance liquidity, or get a better loan, these alternatives give you the information you need to make sound financial decisions. Remember to evaluate your unique situation and consult with qualified financial specialists to determine the best course of action for ensuring a firm foundation for your financial stability.

For more information, get in touch with us at Provident