K|Wise · Glossary
Cap
A contractual maximum on how much your variable mortgage rate can rise over a defined period. A common UAE structure caps the rate at 5.99% for the first 3 years.
In plain English
A contractual maximum on how much your variable mortgage rate can rise over a defined period. A common UAE structure caps the rate at 5.99% for the first 3 years.
What Cap means in practice
A cap is a ceiling written into the loan agreement. Your rate can still move with the benchmark, but it cannot climb past the capped figure for as long as the cap applies.
It is not the same as a fixed rate. A fixed rate holds one number steady; a cap lets you keep the benefit of any fall in the benchmark while limiting the damage from a rise.
How it works in the UAE
UAE lenders often attach a cap to the early years of a variable product — a common structure holds the rate at no more than 5.99% for the first three years. Read the cap alongside the reversion terms: a generous cap that expires into an uncapped EIBOR-linked rate offers less protection than it first appears.
A worked example
If your rate is quoted as 3-month EIBOR plus a 1.50% margin and EIBOR climbs to 4.75%, the arithmetic points to 6.25%. With a 5.99% cap in force, you would pay 5.99% instead.
Terms that come up alongside Cap
Amortisation
The gradual repayment of a mortgage loan through scheduled monthly instalments of principal and interest. In the early years more of each payment goes to interest; in the later years more goes to principal.
Read the definitionBuy-to-Let Mortgage
A mortgage used to purchase a property that will be rented out rather than occupied by the borrower. Lenders assess the deal on projected rental income alongside the borrower's personal income.
Read the definitionConveyancing
The legal process of transferring property ownership from seller to buyer, including title checks, NOC issuance, mortgage registration, and the final Land Department transfer.
Read the definitionDBR (Debt Burden Ratio)
The total of your monthly debt commitments — mortgage, car loan, credit card minimums, personal loans — expressed as a percentage of your net monthly income. UAE Central Bank caps the DBR at 50%.
Read the definitionDeposit
The portion of the purchase price you pay from your own funds. The UAE Central Bank requires at minimum 20% for first-time resident buyers, 25% for second properties, and 25% to 50% for non-residents.
Read the definitionDrawdown
The point at which the lender releases the mortgage funds — typically paid directly to the seller at the Land Department on transfer day.
Read the definition