What is a buy out?

A Buyout from a property finance/mortgage perspective is a transaction where you move your outstanding balance from one financial institution to another.

When should I consider moving my mortgage to another institution?

A good time to review your payment amount and consider moving to another lender is upon expiration of your initial fixed rate. A standard occurrence when your initial rate matures is your monthly cost goes up due to the product converting to the banks ‘follow on rate’. Your follow on rate will be based on a bank margin plus an EIBOR rate (Emirates Inter Bank Offered Rate), your rate from the point of maturity may vary either monthly, quarterly, half yearly or annually.

Why would I need to move to another institution?

The reason to move your outstanding balance between institutions is simply to save money.

You may find that your rate has taken a jump following the maturity in comparison the the product you initially signed up for, or the market just may have substantially better products available in comparison to what was available when you initially took your mortgage.

Moving your loan to a lender who offers better rates can offer substantial savings in two significate areas:

Installment – The obvious saving is the direct impact of lowering your monthly installment, when moving you may find significantly better profit / interest rates available that will translate into saving cash instantly by reducing your monthly installment.

Interest/Profit Savings – The less obvious, but the actual savings made when moving to a new lender can be found in the savings accumulated on lower/profit interest. Interest savings as mentioned above can translate to lower instalments but with the lower payment you will find that the capital still reduces at the same/faster speeds as the higher installment with your current mortgage provider.