The UAE Central Bank has revised the regulations governing home loans in the country. And borrowers aren’t complaining!
The regulator has announced two big changes that are set to bring some respite to potential and existing mortgage borrowers. In fact, the amendments are based on recent customer feedback received by the Central Bank.
Here’s a recap of what the changes cover and how they impact us…
Early settlement fees slashed from 3% to 1%
Remember the good old days (not very long back) when the early settlement penalty on home loans was a reasonable 1% or AED 10,000 (whichever was lower)? To the dismay of potential home owners, this was bumped up to 3% when the Central Bank announced its new fee caps for banking services in 2018.
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Well, the rule has been changed for the better. The 3% fee cap has been reverted back to the much lower maximum fee of 1% of the outstanding mortgage balance (or AED 10,000, whichever is lower). This is great news for borrowers who want the flexibility to fully repay their lenders and close the mortgage whenever they choose to.
Maximum age requirement removed
The regulator has also scrapped the maximum age requirement for mortgages. In the past, borrowers had to be under 70 years of age at the time of the last mortgage repayment. The ball is now in the lenders’ court. They can choose to fix the age requirement as they deem appropriate.
This is a tricky one though. Most banks in the UAE have set the maximum age upon loan maturity, at 65 years for salaried customers and 70 for self-employed customers. Now 65 is the maximum retirement age across most employers in the country. It is unlikely that banks would risk non-repayment by extending the age limit any further for salaried borrowers.
It’s also important to note here that a longer loan tenure may not be the best thing for your finances. The longer the loan term, the more interest you’ll end up paying. This will effectively make it more expensive for you to own the home in the long run. Therefore, pick a mortgage amount and tenure that’s in line with your repayment capacity and financial goals.