Mortgage & Loan Calculator

How mortgages work in the UAE

UAE home loans are capped by the Central Bank of the UAE, not just by the bank's appetite. The rules set a maximum loan-to-value that depends on who you are and what you're buying, a limit on your total debt repayments, and a maximum term (CBUAE mortgage regulations):

• Expats, first home: up to 80% of the value up to AED 5,000,000, and 70% above it.
• UAE nationals, first home: 85% and 75% on the same split.
• Second and later homes: 60% for expats, 65% for nationals.
• Off-plan property: 50%.
• All your loan and card repayments together: no more than 50% of your income, over a term of up to 25 years.

Rates are commonly fixed for an initial period and then become variable, priced as a margin over a benchmark such as EIBOR. Re-run the calculator at the expected variable rate to see the payment after the fixed period.

How loan payments work

A standard repayment mortgage or loan is fully amortizing: you pay the same amount every month, and by the final payment the loan is paid off completely. Each payment covers the interest accrued on the current balance, and whatever is left reduces the principal.

The formula behind it is:

M = P × [ r(1 + r)ⁿ ] / [ (1 + r)ⁿ − 1 ]

where M is the monthly payment, P is the principal, r is the monthly interest rate (annual rate divided by 12), and n is the number of monthly payments. If the rate is zero, the payment is simply the principal divided by the number of months.

Worked example

Suppose you borrow AED 1,500,000 at 4.5% over 25 years — an illustrative loan for the United Arab Emirates, not a rate quote. The monthly rate is 4.5% ÷ 12 ≈ 0.3750%, and there are 300 payments. The formula gives a monthly payment of about AED 8,337. That single figure is where every comparison below starts.

What does 25 years of interest actually cost?

The monthly payment is what you qualify on; the total interest is what the loan costs you. They point in opposite directions, and the same AED 1,500,000 at 4.5% makes the point plainly:

• 25-year term: about AED 8,337 a month, roughly AED 2,501,246 paid in total — AED 1,001,246 of interest.
• 15-year term: about AED 11,475 a month, roughly AED 2,065,482 paid in total — AED 565,482 of interest.

A payment 38% higher saves AED 435,764 of interest. That trade — monthly cash flow against lifetime cost — is the single biggest decision in the whole mortgage, and it is the one the year-by-year breakdown above is there to make visible. Expand it and look at the first year: on the 25-year loan, only about AED 33,230 of your first twelve payments touches the principal.

How much does overpaying save?

Put an amount in the Monthly overpayment field. It is added to every payment and goes straight off the balance, so each later month is charged interest on a smaller sum. Your contractual payment doesn't change; the loan simply ends sooner.

On the AED 1,500,000 example, an extra AED 1,000 a month takes total interest from AED 1,001,246 to AED 800,919 — a saving of about AED 200,327, with the loan cleared 4 years 5 months early (20 years 7 months instead of 25 years).

Many UAE banks allow a limited free partial prepayment each year and charge a capped early settlement fee beyond it. Ask your bank whether a partial prepayment shortens the term or lowers the instalment — only the first gives the full saving shown here.

Before committing spare cash to the mortgage, it's worth pricing the alternative: the same AED 1,000 a month invested instead is the comparison that decides it. Roughly, overpaying wins when your mortgage rate beats the return you realistically expect after tax; investing wins when it doesn't. At 4.5% that is close enough to be worth calculating rather than assuming.

Can this tell me what I can afford?

It answers the question from the other end — it tells you what a given loan costs per month, not what loan your income supports. For that, use the mortgage eligibility calculator, which applies the Central Bank's loan-to-value and debt-burden limits. Either way, start with what your pay leaves after pension contributions, where they apply, decide what share of that you're prepared to commit to housing, then raise the loan amount here until the payment hits that ceiling.

Leave room when you do it. The payment shown here is principal and interest only; in the United Arab Emirates you also pay building service charges, home insurance, and the life insurance UAE lenders require on the loan. A payment that exactly fills your budget on this page is a payment you can't afford.

Tips for the United Arab Emirates

• Remember the extras. This shows principal and interest only — building service charges, home insurance, and the life insurance UAE lenders require on the loan come on top.
• Start from the cap, not the price. The loan-to-value limits above set your minimum down payment before any bank looks at your income.
• Ask what happens after the fixed period. Find out the margin over the benchmark and model that rate here.
• Clarify partial prepayments. Ask whether extra payments shorten the term or reduce the instalment — only the first gives the full saving shown here.

Monthly payment on AED 1,500,000, by rate and term

Principal and interest only, repayment loan, fixed rate for the whole term. Illustrative rates, not quotes.