Fixed Rate Ending? How Your UAE Mortgage EMI Will Change

You took your mortgage at a low fixed rate, and for the past few years your EMI (equated monthly instalment) has been the same every month. It feels settled.

It isn't. That rate has an end date. When it arrives, your bank does not extend it or match the promotional rates it offers new customers. Your loan moves to a variable rate, and your EMI goes up.

Then comes the part most owners miss. Your bank usually won't improve your deal until another bank has approved you, and that bank will value your property again. If prices have dipped, you may have to pay part of the loan yourself.

In this guide, you’ll discover how your EMI changes when the fixed period ends and the valuation catch that can make switching harder.

TL;DR

• Your fixed rate ends on a set date, and the bank will not renew it on its own.
• Your loan moves to a variable rate (bank margin plus EIBOR), so your EMI can rise. Example: on a AED 2M loan, the EMI goes from about AED 10,545 to AED 12,654, roughly AED 2,100 more a month.
• Banks usually improve your deal only after another bank pre-approves you.
• A new bank re-values your property, so a price drop can leave a cash gap between your outstanding loan and what it will lend (80% or 60% of the value, depending on your eligibility).

Most UAE mortgages come with a fixed rate for the first 1 to 5 years, and 3 years is the most common. During this time, your rate and your EMI stay the same, whatever the market does.

When the fixed period ends, your loan moves to a variable rate automatically. The new rate has two parts: your bank's margin, which is set in your mortgage contract, and 3-month EIBOR. EIBOR (the Emirates Interbank Offered Rate) is the rate UAE banks charge each other for short-term loans, and it changes over time. Not sure when your fixed period ends? Check your mortgage offer letter or ask your bank for the exact date.

Where rates stand today. Over roughly the last three years, fixed rates have sat between 3.99% and 4.99%. Fixed rates are generally lower than the variable rate at the same time, so the switch usually means a higher rate.

Rate	Level
Fixed rates over the last 3 years	3.99% to 4.99%
3-month EIBOR today	About 4.1%
Variable rate after the fixed period (margin plus EIBOR)	5.8% to 6.2%

Here is a simple example. The numbers are illustrative, and the rates sit within the ranges above.

The loan:

• Loan amount: AED 2,000,000
• Tenure: 25 years
• Fixed rate: 3.99% for the first 3 years

During the fixed period, your EMI is about AED 10,545 a month.

When the fixed period ends, your rate becomes your bank's margin plus 3-month EIBOR:

• Margin: 1.79%
• 3-month EIBOR: 4.02% (close to today's level)
• New rate: 1.79% + 4.02% = 5.81%

At 5.81%, the same loan has an EMI of about AED 12,654 a month.

Item	During the fixed period	After the fixed period
Interest rate	3.99%	5.81% (1.79% margin + 4.02% EIBOR)
Monthly EMI	About AED 10,545	About AED 12,654
Change	Starting point	About AED 2,100 more every month

That is around AED 25,000 more a year, without borrowing a dirham more. A rise of under 2 percentage points looks small, but it applies to the whole balance, so on a large loan it adds up quickly.

Your numbers will differ. If EIBOR is lower when your fixed period ends, the jump will be smaller. If it is higher, the jump will be larger. The example shows how the switch works, so you can plan for it before it happens.

A higher EMI is one problem. The bigger surprise for many owners comes when they try to fix it by moving to a cheaper bank.

When you apply to a new bank, it does not simply take over your loan balance. It values your property again and lends up to **80% of the lower of the purchase price and the new valuation. **80% is the usual limit for UAE residents buying their first home under AED 5M.

Depending on your eligibility, it can be lower, for example 60%. This move is called a buyout: the new bank pays off your old loan, and you cover any difference.

Here is what that looks like with our AED 2M example. Three years in, you have repaid about AED 148,700 of the principal. Suppose the property is now valued at AED 2.1M.

Item	Amount
Loan outstanding	About AED 1.85M
Current valuation of your property	AED 2.1M
Loan the new bank approves (80% of valuation)	AED 1.68M
Cash gap you pay yourself	About AED 171,000

If your property is still valued close to what you paid, the new bank can cover your full balance, and there is no gap. The problem only shows up when the market has softened, and you often don't know until the valuation is done.

Your Three Options

• Absorb the higher EMI. If the gap is too large or the savings are small, staying put is a valid choice. In our example, that means paying about AED 2,100 more a month.

• Find the cash gap. If you have savings set aside, you can cover the difference and move to a lower rate. This only makes sense if the monthly savings outweighs the cash you put in and the switching costs.

-** Buy out early, while the value holds.** With no cash gap to cover, the main extra cost is the early settlement fee for moving before the fixed period ends. It is capped at 1% of your balance or AED 10,000, whichever is lower. On our AED 1.85M balance, that is AED 10,000, against about AED 2,100 a month in extra EMI.

When to Act

If you are going to do a buyout at some point, you will pay the same switching costs and early settlement fee whether you do it today or two years from now. Waiting does not make it cheaper.

What waiting can cost you is the valuation. If your property value is holding up today, moving now means the new bank can lend what you owe, and you can start a fresh fixed period for the next three years. That gives rates and property values time to settle, which matters because rates are a little expensive today and are moving up.

Start looking about six months before your fixed period ends. That gives you time to get your property valued, compare offers, and complete before the higher EMI starts. If your value is holding, you do not need to wait for that six-month window.

For the full process, costs and timeline, read our guide on how to buy out your mortgage in the UAE.

Most owners get caught out for one simple reason: they find out about the EMI jump and the valuation gap too late. Let's Prosper puts both in front of you early, so you can plan instead of react.

You see your next EMI before the bank changes it. Prosper keeps a summary of your mortgage and updates EIBOR live. As your fixed period gets closer, you can see what your next EMI is likely to be, well before it hits your account.

**You see your property value moving. **Prosper shows recent transactions near your property, so you can estimate what it is worth today. If prices nearby are holding, you know there is room to move. If they are falling, you know a cash gap could be coming, and you can start saving or act sooner.

**You get time to choose. **With both numbers in front of you, you can compare offers, ask your bank for a better rate, or buy out while your value still supports the loan and lock in a fresh fixed period.

So instead of asking "why did my EMI jump?", you can ask "what is my best move?" while you still have options.

Sign up on Let’s Prosper today and streamline your mortgage experience.