Top 5 Tips for Getting the Best Mortgage Rates

A mortgage is one of the biggest expenses you will ever incur, and if you reduce the interest even by a half percentage, it can save you a lot of money during repayment. In Dubai, you can get up to 60% funding of the property value depending on your income. According to the Central Bank of the UAE, the eligibility criteria for getting a mortgage in Dubai is AED 15,000 per month for salaried and AED 25,000 for self-employed persons.

Securing a mortgage is confusing and frustrating, but by keeping the following tips in mind, the whole experience can become a lot easier and help you get a loan that meets your budget and needs.

Check and Improve Your Credit Score

Credit score plays an important role in determining the loan terms when it comes to buying a home through a mortgage. Lenders or financial institutions will assess your credit score and decide the interest rate for your approved mortgage. You can ask your bank for your free credit report so that you can take steps to boost your score, if necessary. Improving your credit score will help you secure the best mortgage deal at lower interest rates. Lenders often offer their best mortgage rates to those with excellent credit scores. So, you should check and improve your credit before applying for a mortgage. 

Save for Big Down Payments

The lenders will likely offer lower interest rates to those who pay the big down payments. When the borrowers make larger down payments, it will increase the equity of homes and less risk for the lenders. Even though you can get a mortgage with a lower down payment, the interest will be higher and cost you a lot of money in the long run. The larger down payment will give the following benefits.

• You will have to pay lower monthly mortgage payments.
• The amount you borrow will be less, and it will become easy for you to qualify for the mortgage.
• Mortgage loan insurance will not be required if you pay 20% or more down payment when purchasing the property.
• During your mortgage’s term, you will pay less interest.

So, it is important to set aside a larger amount of cash before shopping for a mortgage.

Shop Around

When you are looking for a mortgage to buy a home in Dubai, your first choice might be your bank. But the market is so competitive, and you have to consider all your options to get the best rates. You might find it confusing where to begin, so here is a list of institutions that provide mortgages.

• Private lenders
• Credit unions
• Trust companies
• Banks

Every mortgage lender has its criteria for lending a mortgage to its customers. So, if one institution turns down your request for a mortgage, you should reach out to others, and you might get a loan. You can also hire a mortgage broker to help you find the best rates according to your needs and goals.

Avoid Major Purchases

When you are searching for the best mortgage rates to buy a home, this is not the ideal time for major purchases such as financing a car or boat. It will impact your credit score and debt-to-income (DTI) ratio, which can prevent you from qualifying for the best mortgage rates. The DTI is a percentage that shows how much of your monthly gross income is required for your debt payments. 

If the DTI ratio is high, lenders consider it risky because it shows that you have less money left in your pocket for mortgage payments after spending on monthly expenses. The applicants must have a DTI ratio of less than 43% of their monthly income to secure a mortgage. For example, if you earn AED 15,000 a month, you should not have more than AED 6,450 in total debt payments.

Pay Your Debt

If you have outstanding debt, it means your DTI is high, and it will be difficult for you to secure a home loan. You have to clear your existing balances before applying for a mortgage. Even if you are sitting at a 43% DTI ratio, you must bring that percentage down to get a better mortgage deal. Paying your outstanding debt will improve your credit score, which is one of the most important factors in securing a mortgage at lower interest rates. In UAE, it is advised to have a credit score between 650 and 700 or higher to qualify for lower interest rates.

Documents Required to Get Mortgage in Dubai

The following list of documents is required to secure a home mortgage in Dubai.

• A copy of a visa or passport
• Original or copy of your Emirate ID
• Salary certificate or proof of employment
• Proof of residence (copy of tenancy contract or DEWA bill)
• Bank statements and payslips for the last six months
• Last statements of credit card

For a non-resident, getting a mortgage in Dubai requires the following things.

• Evidence of legal residence in Dubai
• Documents that prove you can afford the mortgage
• A copy of a passport or personal identification documents
• Bank statements or proof of your salary 

Keep in mind that these requirements vary for every mortgage lender in Dubai.

Conclusion

In addition to your credit score, personal finances, and down payment, other factors can influence your mortgage rate, such as loan amount and the location of the home you want to purchase. Most of the time, your mortgage rates are determined by the type of mortgage you choose. So, by following these tips, you will have a greater chance to get the best mortgage rates to buy your dream home.