Key Points in 15 Seconds
- Fixed Rate: Stable payments for 1-5 years, protection from rate increases
- Variable Rate: Linked to EIBOR, payments change with market conditions
- Many borrowers choose fixed rate initially, then switch to variable
- You can switch between rate types (fees may apply)
Understanding Your Rate Options
One of the most important decisions when getting a mortgage is choosing between a fixed or variable interest rate. Each has advantages and disadvantages depending on your financial situation and risk tolerance.
There's no universally "better" option - the right choice depends on your circumstances, market expectations, and how long you plan to hold the property.
Fixed vs Variable: Side by Side
Fixed Rate
Advantages
- Predictable monthly payments
- Protection from rate increases
- Easier budgeting
- Peace of mind
Disadvantages
- May start higher than variable
- Miss out if rates fall
- Early exit fees during fixed period
Variable Rate
Advantages
- May start lower than fixed
- Benefit from rate decreases
- More flexibility
- Often lower early exit fees
Disadvantages
- Payments can increase
- Harder to budget
- Exposed to market changes
Understanding EIBOR
EIBOR (Emirates Interbank Offered Rate) is the benchmark interest rate used for variable rate mortgages in UAE. It represents the rate at which UAE banks lend to each other.
How Variable Rates Work
Variable rate = EIBOR + Bank Margin (e.g., EIBOR + 2%)
If EIBOR is 4% and your margin is 2%, your rate is 6%. If EIBOR rises to 5%, your rate becomes 7%.
Note: EIBOR rates are published daily and can change frequently. Most banks review variable rates monthly or quarterly.
Which Should You Choose?
Consider Fixed Rate If:
- You prefer predictable monthly payments
- You're on a tight budget and can't handle payment increases
- You believe interest rates will rise
- You plan to hold the property for the full fixed period
- This is your first mortgage and you want stability
Consider Variable Rate If:
- You can handle payment fluctuations
- You believe interest rates will stay stable or fall
- You may sell or refinance in the near future
- You want flexibility without early exit penalties
- You have financial cushion to absorb payment increases
Popular Strategy: Start Fixed, Then Switch
Many UAE borrowers choose a fixed rate for the initial 2-3 years for stability, then switch to variable once they're more comfortable with their mortgage and market conditions.
This approach provides peace of mind during the early years when other costs (furnishing, moving, settling in) are high, then offers more flexibility later.
Compare Fixed vs Variable Quotes
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Related Resources
Frequently Asked Questions
What is the difference between fixed and variable rate mortgage?
What is EIBOR and how does it affect my mortgage?
Which is better: fixed or variable rate mortgage in UAE?
Can I switch from fixed to variable rate?
How long are fixed rate periods in UAE?
This content is not financial advice. Please consult a licensed financial advisor before making borrowing decisions.
LeoCompare may receive referral commissions from partnered financial institutions. This does not influence the information presented.
Reviewed by the LeoCompare Editorial Team – specialists in UAE home financing content.
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