If you already have a conventional mortgage in the UAE but now want your property financing to follow Shariah principles, you may be able to switch to Islamic home finance through refinancing.
The process is generally known as a mortgage refinance, balance transfer or Islamic home-finance refinance. Instead of continuing with your existing conventional mortgage, a new Islamic financial institution can provide financing that is used to settle the outstanding balance with your current lender.
The UAE Central Bank’s mortgage regulations allow borrowers to refinance with other financial institutions, while Islamic mortgage providers must also comply with the applicable mortgage requirements.
However, switching is not simply a matter of changing banks. You need to compare the existing mortgage settlement costs, the new Islamic finance structure, fees, monthly payments and overall cost before making a decision.
Can You Switch From a Conventional Mortgage to Islamic Home Finance?
Yes, refinancing an existing conventional mortgage into Islamic home finance can be possible in the UAE, subject to the new financial institution’s eligibility and credit criteria.
For example, Emirates Islamic states that customers can refinance an existing home loan or mortgage facility from another bank through its home-finance offering. Its current Key Fact Statement also lists balance transfers of existing facilities as one of the supported transactions.
The important point is that you are generally not converting the existing conventional mortgage contract itself.
Instead, the process involves replacing the existing financing with a new Islamic home-finance facility.
How Does the Switch Work?
The process can be simplified into four main stages:
Existing conventional mortgage → New Islamic home-finance approval → Settlement of old mortgage → New Islamic finance begins
The new financial institution assesses your application and property. If approved, the new financing is used to settle the outstanding amount with your existing lender, subject to the required procedures.
You then continue your property financing under the new Islamic structure.
The exact mechanics depend on the Islamic financial institution and the structure used.
Why Do Homeowners Switch to Islamic Finance?
There are several reasons a homeowner may consider refinancing.
Shariah Compliance
For homeowners who want their property financing to follow Islamic finance principles, switching away from a conventional interest-based mortgage may be an important financial and personal decision.
Islamic home finance is structured under Shariah-compliant contracts rather than a conventional interest-bearing loan. The Central Bank recognizes Islamic mortgage finance as a distinct form of financing while requiring Islamic providers to comply with applicable mortgage regulations as well as their Shariah requirements.
Changing Financing Terms
You may also consider refinancing if another provider offers terms that better suit your financial circumstances.
This could include differences in:
- Profit rate
- Monthly payment
- Financing tenure
- Fees
- Early settlement terms
- Fixed or variable pricing
However, the cheapest-looking monthly payment is not necessarily the lowest-cost option overall.
Better Understanding of Islamic Home Finance
Some homeowners initially choose conventional financing and later decide that they would prefer an Islamic structure.
Refinancing provides a potential route to make that change without selling the property.
What Is the Difference Between Conventional and Islamic Home Finance?
The main difference is the underlying financing structure.
With a conventional mortgage, the bank lends money to purchase the property and charges interest according to the mortgage agreement.
Islamic home finance uses a Shariah-compliant structure. For example, an Ijarah product can involve the financial institution purchasing the property and leasing it to the customer under agreed terms. The customer’s payments can include the property’s cost and the institution’s profit or rental component.
Other Islamic products may use Murabaha or Diminishing Musharaka structures.
Therefore, when switching, you should understand the actual contract being offered, not just the label “Islamic mortgage.”
What Is an Islamic Mortgage Refinance?
Islamic mortgage refinancing involves replacing an existing property-finance arrangement with a new Islamic home-finance facility.
A simplified example:
You originally purchased a Dubai property using a conventional mortgage.
Suppose your current outstanding mortgage is:
AED 1,200,000
You apply for Islamic home finance with another eligible financial institution.
If approved, the new facility is structured to settle the outstanding conventional mortgage, subject to the applicable terms and transaction process.
Your previous mortgage is then closed, and your new financing relationship is governed by the Islamic home-finance agreement.
The actual settlement amount may be different from the outstanding principal because you need to account for applicable settlement charges, fees and other costs.
Step-by-Step Process to Switch to Islamic Home Finance
Step 1: Review Your Existing Mortgage
Before contacting an Islamic financial institution, find out exactly what you currently owe.
Request information such as:
- Outstanding balance
- Current interest rate
- Remaining tenure
- Monthly payment
- Early settlement amount
- Applicable fees
- Mortgage liability letter or settlement statement
This gives you a starting point for comparing the new financing.
Step 2: Check Your Islamic Home-Finance Eligibility
The new financial institution will assess your application based on its eligibility criteria.
Factors can include:
- Income
- Employment
- Existing liabilities
- Credit history
- Age
- Residency
- Property value
- Outstanding finance
- Financing tenure
For example, Emirates Islamic currently publishes separate minimum income criteria for certain salaried and self-employed applicants, illustrating that eligibility requirements can vary by provider.
Step 3: Get the Property Valued
The new financial institution may require a property valuation.
This is important because the property’s current market value can affect how much Islamic finance you may be able to obtain.
If the property has increased in value since you purchased it, this may affect your refinancing position.
However, never assume that the new lender will use the original purchase price. The current valuation and lender’s criteria matter.
Step 4: Compare the New Islamic Finance Offer
Once you receive an offer, compare it carefully with your existing mortgage.
Look at:
- Profit rate
- Monthly payment
- Remaining tenure
- Total amount payable
- Processing fees
- Valuation fees
- Takaful-related costs
- Early settlement terms
- Other applicable charges
A refinancing decision should be based on the total financial impact, not simply the new monthly payment.
Step 5: Apply for the Islamic Home Finance
Submit your documents and complete the new lender’s assessment.
Typical documentation may include:
- Passport
- Emirates ID
- UAE residence visa
- Salary certificate
- Bank statements
- Existing mortgage details
- Property documents
- Proof of income
Self-employed applicants may need additional business and financial documentation.
Step 6: Obtain Approval
The Islamic financial institution completes its credit, affordability and property assessment.
If approved, you receive the relevant offer and finance documentation.
Step 7: Settle the Existing Mortgage
The existing conventional mortgage needs to be settled as part of the refinancing transaction.
The Central Bank’s mortgage regulations state that there should be no impediment to borrowers refinancing with other institutions, while applicable early repayment and refinancing charges can still apply.
Step 8: Complete the Transfer
Once the required documentation, settlement and property procedures are completed, the old mortgage is closed and the new Islamic home-finance arrangement takes effect.
What Fees Should You Consider?
Switching your mortgage can involve several costs.
Early Settlement Fee
Your existing conventional lender may charge an early settlement fee.
The CBUAE’s published fee framework states that early settlement fees for home loans/financing are capped at 1% of the outstanding balance or AED 10,000, whichever is less, subject to the applicable rules.
However, you should obtain an actual settlement quote from your current lender before making any decision.
New Finance Processing Fee
The new Islamic financial institution may charge an arrangement or processing fee.
Property Valuation Fee
A new valuation may be required before approval.
Mortgage Registration and Other Property Costs
Depending on the refinancing structure and transaction, there may be additional registration, documentation or administrative costs.
Takaful-Related Costs
Islamic home-finance products can involve property and/or life Takaful arrangements depending on the product. For example, Emirates Islamic lists Life Takaful and Property Takaful as components associated with its home-finance products.
Always request a complete fee schedule before proceeding.
Is Switching to Islamic Home Finance Cheaper?
Not necessarily.
The purpose of switching may be Shariah compliance rather than simply reducing the cost of financing.
Even when the new Islamic finance rate appears attractive, you need to account for the cost of exiting the existing mortgage and establishing the new facility.
Compare:
Cost of staying with your existing mortgage
versus
Cost of settling the existing mortgage + cost of new Islamic finance + refinancing fees
A lower monthly payment can also result from extending the financing tenure, which may increase the total amount payable over time.
Can I Switch If I Still Have Many Years Left on My Mortgage?
Potentially, yes.
There is no general rule that says you must be close to the end of your mortgage before refinancing.
However, the further you are into your existing mortgage, the more carefully you should compare the remaining financing cost with the cost of switching.
The new lender will also apply its own eligibility and affordability criteria.
Can Expats Switch to Islamic Home Finance?
Eligible expatriates may be able to refinance their conventional mortgage into Islamic home finance.
Your application may be assessed based on:
- UAE residency
- Salary
- Employment history
- Existing financial commitments
- Credit history
- Property value
- Outstanding mortgage
- Age
- Financing tenure
The exact requirements differ between financial institutions.
Can Self-Employed Homeowners Switch?
Self-employed homeowners may also be able to refinance, subject to the lender’s criteria.
Because business income can fluctuate, the financial institution may request additional documents such as:
- Company documents
- Business bank statements
- Personal bank statements
- Financial statements
- Ownership information
- Proof of income
Having well-organized financial records can make the assessment easier.
Does the Property Need to Be Revalued?
Often, yes.
The new financial institution may require a current valuation to determine the property’s value and assess the financing request.
This is particularly important if your property has changed significantly in value since the original mortgage was taken.
A valuation lower than expected could affect the amount of finance available.
What Happens to My Monthly Payment?
Your new monthly payment can be higher, lower or similar to your current payment.
It depends on:
- New finance amount
- Profit/rental rate
- Remaining or new tenure
- Property valuation
- Outstanding balance
- Fees
- Product structure
Don’t choose a refinancing option based only on the monthly instalment.
Ask for the total cost and payment schedule.
Is Islamic Home Finance Really Interest-Free?
Islamic home finance is structured differently from conventional interest-based lending and is designed to comply with Shariah principles.
For example, an Ijarah-based product can involve lease payments and a profit component rather than conventional interest.
However, interest-free does not mean cost-free.
The financial institution still earns a return under the relevant Shariah-compliant structure.
The important question is therefore how the new finance is structured and what you will pay under the agreement.
What Should You Compare Before Switching?
Create a simple comparison before making a decision.
| Factor | Existing Mortgage | New Islamic Finance |
| Outstanding balance | Check current figure | Amount being refinanced |
| Rate/pricing | Current mortgage rate | Islamic profit/rental pricing |
| Monthly payment | Current instalment | New instalment |
| Remaining tenure | Remaining years | New proposed tenure |
| Early settlement fee | Confirm with lender | Not applicable to old facility after settlement |
| Processing fee | — | Check new lender |
| Valuation fee | — | Check new lender |
| Takaful | Existing arrangement | Check new product |
| Total cost | Calculate remaining cost | Calculate total new cost |
This comparison can make it easier to see whether refinancing makes financial sense.
Common Mistakes to Avoid
Focusing Only on the New Rate
The new rate is only one part of the calculation.
Ignoring Early Settlement Costs
Ask your current lender for the actual settlement figure.
Extending the Tenure Without Checking Total Cost
A longer tenure may reduce monthly payments but increase the total amount paid.
Assuming Every Islamic Bank Has the Same Product
Islamic home-finance structures, pricing and eligibility requirements vary between financial institutions.
Not Checking the Property Valuation
The current property value can affect refinancing eligibility.
Signing Before Understanding the Contract
Read the Key Fact Statement, offer letter and finance agreement carefully.
The CBUAE’s Consumer Protection Standards require regulated financial institutions to provide clear fee disclosures, and they include a cooling-off period framework for certain regulated products.
Frequently Asked Questions
Can I switch from a conventional mortgage to an Islamic mortgage in the UAE?
Yes, refinancing or balance transfer into Islamic home finance may be possible, subject to the new financial institution’s eligibility criteria and the settlement requirements of your existing mortgage.
Is switching the same as converting my existing mortgage?
No. In most cases, you are replacing the existing conventional financing with a new Islamic home-finance facility rather than changing the original mortgage contract.
Will I have to pay an early settlement fee?
You may. The applicable fee depends on your existing mortgage and the relevant UAE regulatory limits. The CBUAE’s published framework caps home-loan early settlement fees at 1% of the outstanding balance or AED 10,000, whichever is less, subject to applicable rules.
Can I refinance my Dubai mortgage with an Islamic bank?
Potentially, yes. Islamic financial institutions in the UAE offer home-finance products that can include balance transfers of existing facilities.
Can expats switch to Islamic home finance?
Eligible UAE-resident expats may be able to refinance, depending on their income, residency, credit profile, property and the lender’s criteria.
Can self-employed people refinance into Islamic home finance?
Yes, subject to eligibility. Self-employed applicants may need to provide additional business and financial documents.
Will I need a new property valuation?
The new financial institution may require a current valuation as part of its assessment.
Will my monthly payment automatically decrease?
No. Your new payment depends on the new financing amount, pricing and tenure. A lower payment may also result from extending the tenure.
Is Islamic home finance completely free of financing costs?
No. Islamic home finance is structured differently from conventional interest-based lending, but it still involves a financial return to the institution through the relevant Shariah-compliant structure.
How long does mortgage refinancing take?
The timeframe varies according to the financial institution, documentation, valuation, approval and settlement process. Providing complete documents can help avoid unnecessary delays.
Final Thoughts
Switching from a conventional mortgage to Islamic home finance in the UAE can be possible through refinancing or balance transfer.
For homeowners who want Shariah-compliant property financing, it can provide a way to replace an existing conventional mortgage without selling the property.
But refinancing should not be treated as a simple rate comparison.
Before making the switch, calculate your outstanding mortgage, early settlement cost, new Islamic finance amount, profit or rental pricing, fees, monthly payment and total amount payable.
Most importantly, obtain a clear offer from the Islamic financial institution and understand the underlying Shariah-compliant structure before signing.
If you’re considering switching your Dubai or UAE mortgage to Islamic home finance, checking your eligibility and comparing the numbers first can help you make a more informed decision.
Ready to explore Islamic home-finance options?
Check Your Islamic Mortgage Eligibility
Eligibility, pricing, refinancing availability and approval are subject to the relevant financial institution’s criteria, applicable UAE regulations and final assessment.
