Mortgage Glossary

1. Amortization: The process of gradually reducing the value of a loan or asset over a specific period through scheduled payments.

2. Amortization Schedule: A detailed table of monthly payments for a mortgage loan, showing the breakdown of each payment into principal and interest components.

3. Buy-Out : Transferring a mortgage from one bank to another to secure better terms and conditions. [Learn more about refinance](https://fcmb.ae/mortgages/refinance).

4. Buy-Out Fee : A penalty fee charged by the bank if a borrower repays the mortgage loan earlier than the agreed term, capped at 1% of the amount repaid earlier or AED 10,000, whichever is lower. Some banks may waive this fee for early settlement due to property sale.

5. Buyout with Equity Release: Transferring a mortgage to a different bank for better terms while obtaining additional funds for property improvements or investments.

6. Closing Costs: Expenses incurred when transferring property ownership from seller to buyer, including land department fees, property registration fees, real estate agency fees, property valuation fees, and mortgage registration fees, typically totaling 5-7% of the property value.

7. Collateral: An asset used to secure a debt. Example: When purchasing a home through bank financing (Mortgage), the real property will be used as collateral for the loan.

8. Collateral Management: Tasks related to managing the collateral for a mortgage loan, such as appraisals, legal verifications, and ensuring enforceability.

9. Commission: The fee earned from a real estate transaction, usually a percentage of the purchase price of the property. Only RERA-registered brokers can charge commission in a real estate transaction.

10. Common Areas: The common parts of a jointly owned property designated for common use by the owners and occupants of units. Examples include lobbies, pools, gyms, hallways, and stairways.

11. Comparative Market Analysis (CMA): A market research tool used to calculate the fair market price of a property by comparing several similar properties to the subject property. Often used by a broker to advise a seller on the listing price.

12. Conventional Mortgage: A mortgage based on interest rates, where the bank lends money to purchase property and charges an agreed-upon interest rate.

13. CPV (Contact Point Verification): A due diligence process conducted by the bank to verify the mortgage applicant's identity and employment status through various means such as email, telephone, or site visits.

14. Default: Failure of the borrower to make a scheduled monthly payment to the lender.

15. Developer NOC (No Objection Certificate): A letter from the property developer confirming that all dues are paid, allowing the transfer of property ownership.

16. Disbursement: The release of loan funds by the bank, usually in the form of a check to the property developer or borrower.

17. DLD (Dubai Land Department): The regulatory authority responsible for overseeing property rights and transactions in Dubai.

18. Downpayment: An upfront payment made by the buyer towards the purchase price of the property, reducing the loan-to-value ratio.

19. Drawdown: The act of withdrawing funds from a loan agreement on a specified date.

20. DSCR (Debt Service Coverage Ratio): A ratio used in commercial properties to compare net annual rental income to annual mortgage payments. It must be less than 1.5 in the UAE.

21. DSR/DBR (Debt Service Ratio/Debt Burden Ratio): The portion of a borrower's monthly income used to pay debt obligations, regulated to be less than 50% by the UAE Central Bank.

22. Dubai Municipality Tax: A tax of 5% on the rental contract value for all premises.

23. Due Diligence: A comprehensive evaluation process by mortgage providers to mitigate risks and ensure compliance with lending policies during the loan application process.

24. EIBOR (Emirates Interbank Offered Rate): The average interest rate at which UAE banks lend to each other, used as a benchmark for setting retail loan rates.

25. EMI (Equated Monthly Installment): The fixed monthly repayment made by a borrower to the lender.

26. Equity: The difference between the appraised value of a property and the total claims against it, representing the homeowner's ownership stake.

27. Equity Release: A loan taken against the value accumulated in a fully owned property, used for improvements or investments.

28. ESF (Early Settlement Fee): A penalty fee for repaying a mortgage loan early, capped at 1% of the repaid amount or AED 10,000.

29. Evaluation/Valuation: The process of estimating a property's value, typically required by banks for mortgage approval, conducted by an independent surveyor.

30. Fixed-Rate Mortgage: A mortgage with an interest rate fixed for a specified period, after which it switches to a variable rate formula.

31. FOL (Final/Facility Offer Letter): A document issued by the bank detailing the binding terms and conditions of a mortgage loan after all pre-approval requirements are met.

32. FTV (Finance to Value): Similar to LTV, it represents the finance amount requested as a percentage of the property's value.

33. Islamic Mortgage: A mortgage based on Islamic principles, where the bank buys the property and sells it back to the client for a profit, avoiding interest-based lending.

34. Lien: The lender's right to retain possession of the property until the loan and accrued interest are fully paid.

35. Life Insurance: Mandatory insurance that pays off the outstanding mortgage balance if the borrower dies or becomes permanently disabled.

36. LTV (Loan to Value): The loan amount as a percentage of the property's value.

37. Mortgage Loan: A legally binding contract between a borrower and a lender to finance the purchase, construction, or renovation of a property.

38. Mortgage Loan Providers: Banks and financial institutions that offer mortgage loans.

39. Oqood: The pre-title deed or initial contract of sale for off-plan properties registered on the DLD's online portal.

40. Pre-Approval/Approval in Principal (AIP): A document indicating the bank's likelihood to approve a mortgage application after evaluating the applicant's creditworthiness.

41. Pre-Qualification: An estimate of the loan amount a borrower can obtain, based on basic financial information.

42. Property Insurance: Insurance covering losses or damages to a residence, also known as fire insurance in Islamic banking.

43. Refinance: The process of exchanging an existing mortgage for a new one, either through a buyout, equity release, or a combination of both.

44. Registration Trustee Offices: Authorized offices by the DLD to process property-related tasks such as transfers, sales, mortgages, and registrations.

45. RERA (Real Estate Regulatory Agency): The body that regulates real estate activities in Dubai, aiming to improve foreign investment and settle disputes.

46. Residual Financing/Associated Fee Financing: Including associated fees in the principal loan amount, such as DLD title transfer fees and real estate agent commissions.

47. Stress Test: A test to determine a borrower's ability to repay a loan and to protect against excessive debt, usually using an interest rate 2-4% higher than the market rate.

48. Stress Test Rate: The higher interest rate used in a stress test to assess a borrower's repayment capability.

49. Tenor: The loan term, typically up to 25 years in the UAE, with age limits for salaried and self-employed applicants.

50. Variable Rate Mortgage: A mortgage with an interest rate that varies based on a benchmark rate, such as the EIBOR, plus a specified markup.

51. BRN (Broker Registration Number): A unique number assigned by RERA to each broker, which must be used on all advertising materials along with the ORN (Office Registration Number).

52. Broker: An individual who acts as an intermediary between developers and buyers in the primary market and/or sellers and buyers in the secondary market. In Dubai, all brokers must have a RERA card and a trade license from the DED.

53. Commission: The fee earned from a real estate transaction, usually a percentage of the purchase price of the property. Only RERA-registered brokers can charge commission in a real estate transaction.

51. Closing Costs: Expenses incurred when transferring property ownership from seller to buyer, including land department fees, property registration fees, real estate agency fees, property valuation fees, and mortgage registration fees, typically totaling 5-7% of the property value.

52. Collateral: An asset used to secure a debt. Example: When purchasing a home through bank financing (Mortgage), the real property will be used as collateral for the loan.

53. Collateral Management: Tasks related to managing the collateral for a mortgage loan, such as appraisals, legal verifications, and ensuring enforceability.

54. Valuation: Valuation is the process of determining the current worth of an asset ( home/ property in this case). This assessment can be based on various factors, including location, size, condition, age, comparable sales, amenities / facilities market conditions, developer reputation and future yields.