Refinance an existing mortgage in the UAE

Refinancing a mortgage means taking out a new loan to replace an existing one. People often refinance to lower the interest they are paying on a loan or to reduce their monthly payments. Some people also refinance a home to pay off the loan faster, or switch from an adjustable rate loan to a fixed rate loan.

How does refinancing a mortgage in the UAE work?

When you buy a home, you take out a mortgage to pay for it. The loan goes to the seller while you pay the bank off over a pre-determined period of years. When you refinance a home, you get a new mortgage. This new loan does not go to the seller, but instead pays off the balance of the old loan.

To refinance a mortgage loan in the UAE, you must qualify for the loan. Just as you applied for a mortgage, you submit an application, go through the underwriting process, and sign on the dotted line, just like when you bought your home.

Reasons to refinance a mortgage in the UAE

Homeowners might want to refinance their mortgage for a variety of reasons:

·       To reduce monthly mortgage payments by securing a lower interest rate (this is particularly relevant when interest rates are expected to rise)

·       To pay off a mortgage faster by applying for a 15-year mortgage instead of paying off a 30-year mortgage

·       To tap into equity built up in a home by converting it into cash and paying off a larger mortgage loan in return (also known as cash-out refinancing)

·       To switch from an adjustable rate loan to a fixed rate loan that provides financial stability (if you prefer even payments)

Things to consider when refinancing a mortgage in the UAE

Before you apply to refinance a mortgage, it is important to crunch some numbers

1.    Set a goal: There should be a good reason behind why you are refinancing, whether it is to reduce monthly payments, shorten the loan term or if you need to convert equity built-up in the home into cash.

2.    Check your credit score and history: The higher your credit score, the better the refinancing terms that lenders will offer you — and the better your chances of getting loan reviewers to approve your loan. Poor credit doesn’t preclude you from getting a loan, but it is wise to spend a few months improving your credit score before you begin the process

3.    Determine how much equity you have: Your equity is the total value of your home minus your mortgage debt. For example, if you still owe AED300,000 on your home, and it is worth AED825,000, your equity is AED525,000 (or 63.6%)

4.    Use a mortgage calculator: The right mortgage brokerage and mortgage calculators can help dramatically shorten the time it takes to find the best mortgage. Once you share your data, they will calculate your monthly savings, new payment and lifetime savings, taking into account the estimated cost of refinancing your home.

5.    Apply with a mortgage broker: Shopping for quotes can save you a lot of money, but speaking to each lender can be a hassle. Lenddoo can help you find the best rates in the market, and get the application done for you. When you have decided on a lender, discuss when it’s best to lock in your interest rate. Once you lock in an interest rate, it cannot be changed until after a certain period of time has passed

6.    Prepare your paperwork: Gather income histories, tax records, bank statements, and any other documentation that your lender might ask you to provide

We hope you found this article helpful. Are you considering buying a property in Dubai or Abu Dhabi?  For support in getting your mortgage, start your journey and get pre-approved today with Lenddoo, the most trusted mortgage broker in the UAE !