The UAE early settlement fee
The Central Bank limits what banks can charge when you repay a mortgage early, in full or in part. The most a bank can charge is 1% of the outstanding balance or AED 10,000, whichever is less. Many banks charge less than this, typically 1% of the amount you actually repay, and some allow one free partial payment a year. Pick the option that matches your loan agreement. If you are not sure, the legal maximum gives you the worst case.
How the saving is worked out
The calculator assumes you keep paying the same monthly amount after the lump sum. Because the balance is smaller, more of each payment goes toward the loan and it finishes sooner. The interest saved is the difference between the interest you would have paid before and after the prepayment.
Worked example
A AED 1,000,000 balance at 4.5% with 20 years left, prepaying AED 200,000:
| Item | Amount |
|---|---|
| Early settlement fee, legal maximum (1% of 1,000,000) | AED 10,000 |
| Interest saved | About AED 232,000 |
| Time saved | About 68 months |
| Net saving | About AED 222,000 |
If your bank charges 1% of the amount repaid, the fee drops to AED 2,000. Either way, the bigger saving comes from time. Every dirham you prepay early in the loan avoids years of interest on that dirham. Check your loan agreement for any free prepayment allowance before you pay the fee.
Frequently asked questions
How much is the early settlement fee in the UAE?
The UAE Central Bank caps it at 1% of the outstanding loan balance or AED 10,000, whichever is less, for full and partial settlements. Many banks charge 1% of the amount repaid instead, and some allow a free partial payment each year.
Is it worth paying off my mortgage early?
Usually, if your mortgage rate is higher than what your savings earn. The fee is small compared with the interest you avoid, but keep an emergency fund before making large prepayments.
Should I reduce my term or my monthly payment?
Keeping the same payment and shortening the term saves the most interest. Reducing the payment instead frees up monthly cash flow. This calculator shows the shorter term option.
Do I pay the fee when I sell the property?
Yes, selling means repaying the loan early, so the same capped fee applies unless your loan terms say otherwise.