Expert Eye - Homeowners must consider refinance

Expert Eye - Homeowners must consider refinanceDhiren Gupta, Managing Director, 4C Mortgage Consultancy

There seems to be a lot of talk about refinancing due to historic low mortgage rates and very competitive terms advertised by every lender. This surely entices many home loan borrowers who want to reduce the cost of their mortgage interest by refinancing the current mortgage and switching it from one bank to another.

There are many reasons why someone should opt for a refinance facility, which eventually saves money and gives financial flexibility.

The present borrowers have greater flexibility as lenders are more focused on giving viable rates for refinancing, wherein the cost of transaction is minimised and undue penalties are lessened especially when banks waive the processing fees. A few even offer free property valuation.

Depending on one's loan requirement and annual income, one can obtain up to 80% refinance of the property value in the UAE. Besides, as per the recent guidelines by the Central Bank, the mortgage regulation also has a forward-looking impact on moderating house prices as most banks have consistent exit fees of 1% or Dh10,000, whichever is lower, for the early settlement of loans.

Appraise refinance

Refinancing a mortgage means a mortgage holder pays off an existing mortgage and sets up another loan with much lower rates. The reasons for refinancing an existing mortgage include obtaining a lower or better interest rate which means lower monthly payments; reducing the mortgage term so that it gets paid off sooner; switching from an adjustable-rate mortgage to a fixed-rate loan or vice versa; extracting cash from the home's equity; and consolidating and paying off other outstanding debts.

Comprehend refinance

Falling mortgage rates could mean it is a good time to compute refinancing. There are two major ways of refinancing:


This saves money by reducing monthly mortgage payments and paying off one loan with the takings from a new loan while using the same mortgaged property as collateral. Typically, refinancing allows you to save thousands of dirhams while taking the advantage of lower interest rates, or shorten the term of your mortgage to build equity faster and this is something to consider if numbers make sense and you can afford.


This is when you take out a new mortgage finance for extra money than what you owe in your current mortgage. This is basically for those who have been in their property for a while and have gained equity that is accessible. It leaves one with cash above the amount needed to pay off existing credit card and loan debts, closing costs, home improvements and any mortgage liens. You may actually use this cash for any other purposes.

Bottom line

Now, your job as a borrower is to have enough knowledge to be able to discuss options with your lender, make a smart move and decide which calculation best suffices your mortgage needs.

Refinancing in Dubai is hassle-free and can even cost you less than 1% of the principal outstanding amount inclusive of appraisal, application fee, Land Department costs and life insurance, or takaful enhancement costs. It also requires almost the same documentation.

Indeed, it will remind you of what you went through when you obtained your original mortgage, but the process can be completed faster if done systematically. However, you still need to understand the current market dynamics and act smartly, which consequently works to significant savings.

Now is the right time to look into your options and safeguard your financial future with an informed choice. Seek a mortgage expert's advice if needed.

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Source: Dhiren Gupta, Managing Director, 4C Mortgage Consultancy


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