If you currently have a conventional mortgage in the UAE but want to move to Islamic home finance, you may be wondering whether you can transfer your existing mortgage to an Islamic bank.
The good news is that mortgage transfer and buyout options may be available in the UAE, subject to the eligibility criteria of the new Islamic finance provider.
This can be an option for homeowners who want to move away from conventional interest-based financing and use a Sharia-compliant home finance structure instead.
However, transferring a mortgage isn’t simply a matter of changing banks. The new provider will normally assess your income, existing finance, property, credit profile and outstanding balance before deciding whether it can take over the existing facility.
This guide explains how transferring a conventional mortgage to Islamic home finance works, what costs you may need to consider and how to prepare for the process.
Can You Transfer a Conventional Mortgage to an Islamic Mortgage?
In many cases, an existing conventional mortgage can potentially be refinanced or bought out through an Islamic home finance facility, provided you meet the new provider’s requirements.
The new Islamic finance provider effectively finances the eligible property and the existing conventional mortgage is settled as part of the transfer arrangement.
The exact mechanism depends on the Islamic finance structure and the provider.
It is therefore better to think of the process as an Islamic home finance buyout or refinancing rather than simply transferring the same mortgage contract from one bank to another.
Why Do Homeowners Switch to Islamic Home Finance?
People consider switching for different reasons.
Sharia Compliance
For customers who want their property financing to follow Islamic principles, moving away from a conventional interest-based mortgage may be an important financial decision.
Changing Financial Circumstances
Your income, property value or overall financial position may have changed since you took out your original mortgage.
Potentially Better Finance Terms
Depending on market conditions and your circumstances, another provider may offer a more suitable financing arrangement.
Better Long-Term Planning
Some homeowners may want to restructure their home finance to better fit their current financial goals.
The reason for switching should be considered alongside the total cost of refinancing.
How Does a Conventional-to-Islamic Mortgage Transfer Work?
Although the exact process varies, the transfer can generally involve several stages.
Step 1: Review Your Existing Mortgage
Start by checking your current conventional mortgage agreement.
Look at:
- Outstanding balance
- Remaining term
- Current interest rate
- Early settlement charges
- Other applicable fees
- Property security arrangements
Request an official settlement statement from your current lender so you know exactly how much is required to close the existing mortgage.
Step 2: Check Your Islamic Finance Eligibility
The Islamic bank or finance provider will assess your financial profile.
This can include:
- Income
- Employment
- Existing liabilities
- Credit history
- Age
- Residency status
- Property value
- Outstanding mortgage
- Repayment capacity
Don’t assume that because you qualified for your existing mortgage, you’ll automatically qualify for Islamic home finance.
The new provider will carry out its own assessment.
Step 3: Property Valuation
The Islamic finance provider may require a valuation of the property.
This helps establish the property’s current market value and determine how much financing may be available.
A change in property value can affect the amount that can be refinanced.
Step 4: Receive an Islamic Home Finance Offer
If you meet the eligibility criteria and the property is acceptable, the provider can issue an offer based on its Islamic finance structure.
Review the offer carefully.
Pay attention to:
- Finance amount
- Profit or rental structure
- Monthly payment
- Finance term
- Fixed or variable pricing
- Fees
- Early settlement terms
- Takaful requirements
- Other conditions
Step 5: Settle the Existing Mortgage
Once the new finance arrangement is approved and the required conditions are satisfied, the existing conventional mortgage can be settled according to the agreed process.
The exact legal and financial mechanism depends on the Islamic finance product.
Step 6: Transfer or Register the New Security
The relevant property security or mortgage registration arrangements need to be updated as part of the transaction.
The provider or relevant authorities can advise you on the required procedure.
Step 7: Start Your Islamic Home Finance Payments
Once the new facility is completed, your future payments will be made under the terms of the Islamic home finance agreement.
What Is a Mortgage Buyout?
You may hear Islamic banks use the term “mortgage buyout” when discussing the transfer of an existing home finance facility.
A buyout generally means that a new provider takes over the financing by settling the outstanding amount owed to the existing lender, subject to the new provider’s terms and eligibility requirements.
For a homeowner, the practical objective is similar:
Existing conventional mortgage → New Islamic home finance arrangement
However, the legal structure is different from simply moving the original mortgage contract.
What Documents Are Needed?
The exact documents depend on the Islamic finance provider, but you may be asked for:
- Passport
- Emirates ID
- UAE residence visa, where applicable
- Salary certificate
- Recent bank statements
- Existing mortgage statement
- Settlement or liability letter
- Property documents
- Title deed
- Valuation documents
- Details of existing financial commitments
Self-employed applicants may also need:
- Trade licence
- Company documents
- Company bank statements
- Personal bank statements
- Financial statements
- Evidence of business income
Having these documents ready can help reduce delays.
What Costs Are Involved in Transferring a Mortgage?
Switching from a conventional mortgage to Islamic home finance can involve several costs.
Early Settlement Charges
Your existing lender may charge an applicable early settlement fee when you close the conventional mortgage.
Check your current mortgage agreement and request an official settlement statement.
New Finance Fees
The Islamic finance provider may charge processing, arrangement or other applicable fees.
Property Valuation Fee
A new valuation may be required.
Registration Costs
Depending on the transaction structure, property or mortgage registration-related charges may apply.
Takaful or Insurance-Related Costs
The new Islamic home finance arrangement may include applicable takaful requirements.
Legal or Administrative Costs
Additional expenses may arise depending on the transaction and provider.
Before switching, calculate all costs, not just the new monthly payment.
Is Switching From a Conventional Mortgage to Islamic Finance Expensive?
It depends on your individual situation.
You may have to pay costs associated with closing your existing mortgage and establishing the new Islamic home finance facility.
However, the decision shouldn’t be based only on the upfront costs.
You should compare:
Cost of staying with your existing mortgage
versus
Cost of switching to Islamic home finance
Your comparison should include the remaining term, outstanding balance, existing mortgage pricing, new finance pricing and all applicable fees.
Will Your Monthly Payment Be Lower?
Not necessarily.
A mortgage transfer doesn’t automatically mean your monthly payment will decrease.
Your new payment can depend on:
- Outstanding finance
- New finance amount
- Profit/rental structure
- Pricing
- Remaining term
- Property value
- Customer profile
A lower monthly payment could also result from extending the finance term, which may affect the total amount paid over time.
Always compare the overall cost, not just the monthly figure.
Can You Switch if You Still Have Many Years Left?
Potentially, yes.
The remaining term of your current mortgage is one factor the new provider will consider.
For example, suppose you have 15 years remaining on your conventional mortgage.
You may explore an Islamic finance facility with a similar term, depending on eligibility.
However, the new provider may have its own maximum finance tenure based on factors such as your age and financial profile.
Can Expats Transfer Their Mortgage to Islamic Finance?
Eligible expatriate residents may be able to refinance an existing mortgage through an Islamic home finance provider.
Requirements can vary based on:
- Nationality
- Residency
- Income
- Employment
- Property
- Existing mortgage
- Credit history
If you’re an expat, ask the provider specifically about its mortgage buyout or refinancing criteria for expatriates.
Can Self-Employed People Switch to Islamic Home Finance?
Self-employed applicants can potentially qualify, but income verification can be more detailed.
The provider may examine:
- Business turnover
- Personal income
- Company bank statements
- Personal bank statements
- Business history
- Trade licence
- Financial statements
- Existing liabilities
Stable and well-documented income can make the assessment easier.
Does the Property Need to Be Revalued?
A valuation may be required by the new Islamic finance provider.
This is important because the property’s current market value may be different from the value when you originally purchased it.
For example, suppose you originally purchased a property for AED 1.5 million and still owe AED 1 million.
If the property’s current valuation is AED 1.8 million, the new provider may assess the refinance based on its current value and applicable LTV criteria.
If the valuation is lower than expected, however, the amount that can be refinanced may be affected.
Can You Transfer an Off-Plan Mortgage to Islamic Finance?
This can be more complicated than refinancing a completed property.
Eligibility depends on:
- Project status
- Developer
- Property completion
- Existing mortgage
- Islamic finance provider
- Applicable financing structure
If the property is still under construction, ask the provider whether it offers an appropriate Islamic finance solution for the specific project.
Conventional Mortgage vs Islamic Home Finance
The most important difference is the underlying financing structure.
A conventional mortgage generally involves borrowing money and paying interest according to the mortgage agreement.
Islamic home finance uses Sharia-compliant structures such as:
- Murabaha
- Ijara
- Diminishing Musharakah
The exact structure depends on the Islamic finance provider and product.
If Sharia compliance is important to you, don’t compare products based only on the monthly payment. Understand how the financing is structured and what contractual obligations apply.
What Should You Compare Before Switching?
Before deciding to transfer your mortgage, compare the following:
Existing Mortgage
- Outstanding balance
- Current interest rate
- Remaining term
- Early settlement fee
- Other charges
New Islamic Finance
- Finance amount
- Profit/rental pricing
- Monthly payment
- Finance term
- Processing fees
- Valuation fee
- Takaful costs
- Early settlement terms
Overall Financial Impact
Calculate the total cost of switching rather than focusing on one figure.
When Might Switching Make Sense?
Switching to Islamic home finance may be worth exploring if:
- Sharia compliance has become a priority
- Your financial circumstances have changed
- Your existing mortgage terms are no longer suitable
- You want to restructure your home finance
- The new provider offers terms that better fit your financial goals
However, you should calculate the total switching cost before making a decision.
When Might Switching Not Make Sense?
Refinancing may not be suitable if:
- Your existing mortgage is close to being fully paid off
- Early settlement costs are high
- The new finance costs are significantly higher
- The new provider cannot offer enough financing
- The property doesn’t meet the provider’s requirements
- Switching would create financial pressure
Sometimes the best decision is to remain with your existing mortgage until a more suitable opportunity arises.
How to Make the Switching Process Easier
Get Your Settlement Figure First
Don’t estimate your outstanding mortgage balance. Ask your current lender for an official settlement statement.
Check Your Credit Profile
Review your credit position before applying.
Prepare Your Documents
Having complete income and property documents ready can speed up the assessment.
Get Multiple Quotes
Compare Islamic finance offers rather than accepting the first option.
Calculate the Break-Even Point
Work out how long it would take for any potential savings to outweigh the switching costs.
Read the New Contract Carefully
Understand the Islamic finance structure, fees and early settlement provisions before signing.
Common Mistakes to Avoid
Looking Only at the New Monthly Payment
A lower monthly payment doesn’t necessarily mean lower total cost.
Ignoring the Existing Mortgage’s Early Settlement Fee
This can significantly affect the economics of switching.
Assuming Your Property Value Has Increased
The new provider may use its own valuation.
Assuming Approval Is Guaranteed
Your existing mortgage approval does not guarantee approval for Islamic home finance.
Not Comparing the Total Cost
Look at the complete cost over the expected finance period.
Rushing the Decision
If your goal is Sharia-compliant financing, take the time to understand the new structure and contractual terms.
Frequently Asked Questions
Can I transfer my conventional mortgage to an Islamic mortgage in the UAE?
You may be able to refinance or buy out an existing conventional mortgage through an Islamic home finance provider, subject to eligibility, property requirements and the provider’s terms.
Is transferring a conventional mortgage to Islamic finance the same as changing banks?
Not exactly. The existing mortgage is generally settled and replaced by a new Islamic home finance arrangement rather than simply moving the original contract.
Will I have to pay an early settlement fee?
Your existing lender may charge an applicable early settlement fee. Request a settlement statement before deciding to switch.
Can expats transfer their mortgage to Islamic finance?
Eligible expatriate residents may be able to use Islamic home finance to refinance an existing mortgage, subject to the provider’s criteria.
Can I switch if I’m self-employed?
Potentially. Self-employed applicants may qualify but may need to provide additional evidence of income and business stability.
Will my monthly payment become lower?
Not necessarily. The new payment depends on the finance amount, pricing, term and other factors.
Do I need a new property valuation?
A new Islamic finance provider may require its own property valuation before approving the refinance.
Can I switch an off-plan mortgage to Islamic finance?
It depends on the project, developer, property status and Islamic finance provider. Off-plan refinancing can have additional conditions.
What documents are required?
Common documents include identification, income documents, bank statements, existing mortgage statements, settlement information and property documents.
Is Islamic home finance cheaper than a conventional mortgage?
Not necessarily. Islamic and conventional financing use different structures, and the overall cost depends on the specific products and customer circumstances. Compare the total cost rather than assuming one is automatically cheaper.
Final Thoughts
If you currently have a conventional mortgage but want to move to Islamic home finance in the UAE, a mortgage buyout or refinancing arrangement may be an option.
The key is to look at the complete financial picture.
Before switching, obtain your current settlement figure, understand any early settlement costs, check your eligibility with Islamic finance providers and compare the new facility’s total cost.
Most importantly, understand the actual Sharia-compliant finance structure you’re entering into rather than focusing only on the monthly payment.
If you’re considering switching your existing mortgage, an Islamic mortgage specialist can help you assess your eligibility, property value, outstanding finance and potential refinancing options before you make a decision.
