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Fixed-rate mortgages: how it works?

Is a fixed-rate mortgage the right choice for you? There are advantages and disadvantages so the answer to that depends on your personal circumstances.

A person signing for a mortgage for which they chose a fixed rate

Is a fixed-rate mortgage the right choice for you? There are advantages and disadvantages so the answer to that depends on your personal circumstances.

In this short guide, we’ll explain what a fixed mortgage rate is, the difference between the length in terms, and what happens at the end of your fixed-rate period.

What is a fixed-rate mortgage?

A fixed-rate mortgage is where the interest rate you pay on the loan is usually ‘fixed’ at a lower rate for a set period. In Dubai, that’s usually between one and five years. Depending on how long you set your mortgage for, the interest rate you pay will vary. Usually, the longer you fix for, the higher the interest rate will be.

One of the main benefits of this type of mortgage is that you’ll know exactly how much you’re going to pay each month.

Whatever happens to interest rates during your fixed-rate period, your payments will remain the same. This can make a big difference when budgeting as you won’t see any sharp and unexpected increases if interest rates were to rise.

What happens at the end of your fixed-rate period?

Once your fixed period comes to an end, your interest rate will revert to the variable rate. This is a fixed percentage above the Emirates Interbank Offered Rate (EIBOR) and so will mean paying more interest every month.

is published by the UAE Central Bank and is based on the average interest rates UAE banks offer.

At this point, you may decide to find another fixed rate mortgage deal to lock in another rate for a set period to continue repaying your mortgage loan at the cheapest rates possible.

Advantages of fixed-rate mortgages:

  • Your interest rates are locked in, so you don’t need to worry about increases.

  • Managing your finances will be easier because you’ll know exactly how much is going out each month.

  • You can choose a short or long-term fixed deal to suit your circumstances.

Disadvantages of fixed-rate mortgages:

  • If interest rates drop, you might be missing out on a better deal elsewhere.

  • If you choose a longer fixed period, your interest rates will be higher and less competitive.

  • Exiting a fixed-rate mortgage early incurs a max of 1% capped at AED 10,000.

Looking for a mortgage? We can help

If you need help finding the best mortgage offers tailored to your needs, then we can help. We’re the first entirely online mortgage broker in the UAE that offers a faster and easier mortgage experience. If you have any questions, then reach out to our friendly in-house team of mortgage specialists.

Speak to our mortgage consultants

With over 20 years of mortgage experience, our consultants can provide guidance and knowledge on the entire mortgage process.


Written by Huspy Team

Published on 28 June 2022

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