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The UAE Central Bank has issued a new directive under which banks can no longer charge a 3% early settlement fee for borrowers who wish to exit their mortgage early.
Banks will instead need to reduce the early settlement fee to a maximum of 1% on the outstanding mortgage amount or AED 10,000, whichever is lower.
Further, borrowers who have already paid the 3% settlement fee can get the refund from their banks within 30 days, according to the circular.
“Early settlement or partial settlement fee for applying to home loans has been reverted to maximum 1% of the outstanding balance or AED 10,000, whichever is less. Banks and finance companies that arbitrarily changed the stated terms of the fees in existing customer agreements are required to respect the original terms of the agreement and refund all overcharges for all customers based on their original fee within 30 days of this notice,” the circular said.
The move is a positive for borrowers who can now change their mortgage to lenders offering better interest rates, resulting in significant savings.
Cavendish Maxwell is the MENA region’s leading firm of property consultants and chartered surveyors. If you are looking for professional real estate consultation or advice on property related matters, please view our services.
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