What is mortgage tenure?
A mortgage tenure is the amount of time over which you need to repay your mortgage loan fully. It’s specified by the lender in the terms and conditions of the loan offer and determines how long you’ll be required to make monthly payments toward your mortgage. It’s also referred to as the mortgage term or loan term.
The mortgage tenure is typically given in years or months. The longer the mortgage tenure is, the lower the monthly payments will be, given the same interest rate. However, the loan will accrue more interest over time so you’ll end up having to pay more interest with a longer tenure. Banks also generally offer lower interest rates for loans with shorter tenures. By using a mortgage calculator you can input a property of interest and see how changing the loan tenure affects the monthly payment or required rental price for buy-to-let properties. This calculator will also provide you with an example payment chart (known as an amortization chart) that breaks down how much money goes toward paying back the interest every year.
Even though your mortgage tenure is set at a specific length, you can still make prepayments or refinance it with a mortgage buyout to pay back the loan sooner and save on interest.
Mortgage tenure limitations in the UAE
Mortgage tenures in the UAE are capped at a maximum of 25 years (300 months). This is 5 years shorter than the 30-year term maximum in the US, ultimately meaning monthly payments in the UAE tend to be a bit higher. Most borrowers in the UAE usually opt for longer-tenure mortgages because it gives them greater financial flexibility month-to-month. On the other hand, it isn’t always up to the borrower. The lender may only let riskier borrowers, as determined by their credit score and finances, take out a shorter-term mortgage.
Both fixed-rate mortgages and variable-rate mortgages have a mortgage tenure. For fixed-rate mortgages, it’s important to distinguish between the fixed-rate period and tenure. In the UAE, mortgage rates are only fixed for 1-5 years after which point they become variable and subject to market interest rate changes. A mortgage tenure is typically much longer than this fixed-rate period.
Specific types of loans can have more restrictive tenures since they are also considered riskier. For example, interest-only mortgages in the UAE generally have a 1-year tenure (or up to 5 years at most).
Another important factor is the age of the borrower. Most lenders in the UAE still require borrowers to fully pay back their mortgage before they are 70 years of age. While the Central Bank of the UAE removed the maximum age limit restriction in 2019, many banks are still using the past requirement criteria when looking at borrowers’ applications.
You’ll likely still find age restrictions as follows:
- For UAE nationals: 21-70 years of age
- For resident expats: 21-65 years of age (up to 70 if self-employed)
- For non-residents: 25-65 years of age.
