Homefront: 'Can I delay switching to a more expensive mortgage amid the pandemic?'
The former Abu Dhabi resident's bank asked her to change to a non-resident home loan with a higher interest rate following her move to France
I relocated back to France a year ago but kept my Abu Dhabi property following the move. It is currently rented out and financed with a mortgage through a bank in the UAE. I understand from the bank that I need to change the status of my contract from resident to non-resident and that this entails moving from a fixed-interest rate of 3.75 per cent to a non-resident rate of about 4.9 per cent.
On top of this, I need to do a partial settlement towards the outstanding balance using my end-of-service benefits that the bank is currently holding.
However, with the current economic challenges due to the coronavirus outbreak, is it the 'right time' for me to change the status of my contract or should I keep dragging the process out as long as possible to ensure I keep the 3.75 per cent rate as long as I can?
Also, would the non-resident interest rate now be lower because of the collapse in the markets and the US Federal Reserve's interest rate cuts? MB, France
Given the current global situation, many countries have moved to lower interest rates in order to stave off the threat of recession.
The Central Bank of the UAE cut its benchmark rate by 75 basis points on March 16 after a surprise rate cut a day earlier by the US Federal Reserve to near zero.
This means that variable rate mortgages are going to be cheaper, however, if you currently have a fixed-rate mortgage, this will not change irrespective of whether rates come down or not.
The 4.9 per cent non-resident rate will therefore only reduce if it is a variable rate. It would not be correct for me to advise 'dragging your heels' on your change of status. This matter is between yourself and your bank.
Mario Volpi is the sales and leasing manager at Engel & Volkers. He has worked in the property sector for 35 years in London and Dubai
The opinions expressed do not constitute legal advice and are provided for information only. Please send any questions to email@example.com
Updated: March 26, 2020 09:28 AM