Comparing a Dubai mortgage quote after 119 days: 8.24% fixed for 5 years

D

daily_porch

Property investor
Established
One option looks cheaper at first glance but becomes less attractive once its lending fee and loan-to-value tier are included. The other carries a substantial upfront charge yet allows more flexible overpayments. Neither feels like an obvious choice.

After 119 days of comparisons, the firm figure I have is 8.24% fixed for five years on a Dubai purchase of about AED 5,028,000. Should I compare the offers by effective annual rate, financing cost over those five years, or every cash payment over the period with principal separated out?

I also need to test an early exit rather than assume I will keep the loan for the full fixed term. How are others allowing for early repayment charges, portability and a possible refinance when deciding whether a higher fee is worthwhile?
 
For this decision I would compare total cash paid over the five fixed years: monthly payments, arrangement fee and any other unavoidable lending costs, less the principal repaid. That separates the financing cost from the amount reducing your balance.

Then run the same calculation assuming you exit earlier. The expensive-fee option may only win if you keep it long enough or make substantial overpayments.
 
What are the actual loan amount, full mortgage term and fee on each quote? AED 5,028,000 is the purchase price, but without the down payment and resulting loan-to-value, the comparison cannot be reproduced. The same fee can look minor on one loan and decisive on another.
 
APR is still a useful starting point because it forces some costs into one number. I would not dismiss it just because the fixed period is five years. It can expose an advertised rate that is being made attractive by shifting cost into fees.

But it needs to be read alongside the lender's assumptions, especially if the rate changes after year five.
 
I disagree that APR should lead the decision here. If there is a realistic chance of selling, refinancing or overpaying within five years, a calculation built around a longer assumed term can point to the wrong quote. I would model three exit dates and compare the remaining balance plus all cash paid at each one.
 
That is fair, but the exit scenarios should not quietly assume refinancing will be cheap or available. I would include a case where the mortgage stays in place after the fixed period and the reset rate is uncomfortable. Otherwise the lowest five-year cost can appear safer than it really is.
 
A simple table should settle most of this. Give each quote columns for upfront fees, fixed monthly payment, balance after years three and five, permitted overpayment, early-repayment cost, portability conditions and the post-fix rate basis. Calculate break-even points for the larger fee.

Also separate “portable in principle” from “useful to me.” Portability may depend on the next property and fresh approval, so the exact wording matters.
 
I would not pay much extra purely for portability unless a move is genuinely likely. Better overpayment terms are easier to value: choose a planned overpayment amount, apply it to both quotes and compare balances at the same date. If no overpayment is realistically affordable, that feature should not outweigh a large fee.
 
Monthly affordability deserves its own test rather than being buried in total cost. Check the quoted payment against a tighter household budget, then test a higher payment after year five. A mortgage can be cheaper on a spreadsheet yet leave too little room for maintenance, service charges or an income interruption.
 
After 119 days, there is also a cost to extending the search without obtaining better information. I would now ask each lender for figures using the same loan amount, term, loan-to-value and completion assumptions, then set a decision date.

Choose based on the scenario you can reasonably fund, not the one requiring perfect refinancing conditions. If the high-fee quote only wins after aggressive overpayments, confirm those payments fit the monthly budget before assigning value to the flexibility.
 
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