Dealing with Debt when Current Property Value is lower than Outstanding Debt

While the UAE economy is recovering from COVID-19, it will be a while before the economy reaches pre-COVID levels. According to the Federal Competitiveness and Statistics Centre, the UAE’s economy shrank by 6.1% in 2020. Some sectors such as food and accommodation services, wholesale and retail, and construction were the hardest hit.

The resulting job losses and pay cuts have impacted many households. One category of people that have been affected heavily is those with a mortgage and whose current property value is lower than their mortgage due. In this article, we provide some solutions to this problem.


When overwhelmed by mortgage debt, people sell off their property to repay their mortgage debt as a last resort. However, when the property’s value is lower than the amount owed to the mortgage lender, things can get difficult for the borrower. You cannot sell the property, and you have to meet your mortgage liabilities despite reduced or no income.

Solutions Available with Borrowers

Borrowers have several options to deal with the dual challenge of reduced property prices and growing mortgage debt.

Request for Payment Holiday

The UAE’s Central Bank has taken several measures to help borrowers whose incomes have been hit by COVID-19. One of these is a mortgage payment holiday to get relief from mortgage payments for a specified period. The payment holiday, under UAE’s Targeted Economic Support Scheme (TESS), can give you enough time to get your finances in order, and hopefully, you can resume your mortgage payments at the end of the payment holiday.

Restructuring your Mortgage

If you are unable to get a mortgage payment holiday, you can try to restructure your mortgage with your lender. Restructuring your mortgage involves reducing your monthly payments by increasing your loan tenure. You can explain your income situation to your bank and realign your payments to your current financial position.

Debt Settlement

Borrowers who have lost their jobs and are planning to leave UAE, and whose loan outstanding is more than the property value can negotiate a debt settlement with their bank. If the lender agrees, they can pay a lower amount than what is due and settle their debt. There are several factors in negotiating a debt settlement with a lender.

Take the Help of Professional Negotiators

Professional debt restructuring services providers can help you in your negotiation with banks. They will understand your financial situation and provide you a customized solution based on your challenges. Solutions will include restructuring of debt or settlement of debt by negotiating a favorable deal with the bank.

FREED can Help!

FREED’s team of mortgage debt experts has over 40 years of experience in banking and real estate. FREED has vast experience in dealing with different types of mortgage debt challenges. FREED can help borrowers arrive at customized debt settlement programs that can help them provide relief from their mortgage debt.