01
What It Means
A reducing rate charges interest on the outstanding balance only — so as you repay principal, interest is charged on a smaller amount over time.
02
Why It Matters
Most UAE mortgages use reducing rates. A reducing rate quoted at the same percentage as a flat rate is genuinely cheaper, so understanding which basis a rate is quoted on is essential when comparing products.
03
Simple Example
On a reducing-rate mortgage, each month's interest is calculated on the remaining balance, so the interest portion of the payment shrinks over the term.
Related Terms
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