How can borrowers minimize mortgage costs?

while it can be tricky to navigate the mortgages in Dubai market, adopting the right measures will help the borrowers bring down their mortgage bills to a considerable extent. Here are some effective ways to do so:

1. Compare Different Lenders

Lenders should be contacted and asked to give the best quotes before agreeing to take a mortgage with any of the banks. Interest rates, terms and fees may also vary from one lender to the other. Considering the comparison websites can give a wider view towards the available excellent deals and consulting the mortgage brokers is helpful as well.

2. Consider the Type of Interest Rate

Choosing the right type of interest rate can have a substantial impact on overall costs. There are two main types of interest rates in the UAE:

  • Fixed-Rate Mortgages: These comes with a fixed interest rate for a certain tenure usually ranging from one to five years. This is advantageous if you prefer constant payment installments so that they’ll be expecting the payments on a monthly basis.
  • Variable-Rate Mortgages: These rates vary depending on the Emirates Interbank Offered Rate (EIBOR) together with a bank spread. Though it pronounced to be more risky than other types of bonds, it is beneficial when the interest rate declines in the future.

3. Optimize Your Down Payment

When one pays a larger down payment, the loan amount is lower and so will be the amount to be charged in terms of interest for the given term. To buy a property worth up to AED 5 million, expats require down payment of not less than 25% while those who want to acquire properties from AED 5 million to AED 10 million will be required to pay at least 35% down payment. Clearly, by paying more for down payment, you are able to reduce your monthly obligations and overall interest.

4. Utilize Offset Mortgages

Offset mortgages are those in which your savings account is combined with your mortgage. This balance in your savings account or your checking account of course offsets the mortgage principal and therefore brings down the rate of interest incurred. This is especially so when you hold a large amount of money in your savings account to ensure that the interest payments are kept to the minimal.

5. Refinance When Possible

One can always enjoy significant saving by paying for their mortgage through refinancing, for example when the rates in the market are lower than those used by the initial mortgage. It is possible to lower monthly payments and the total interest accrued by opting for a lower rate or a different kind of mortgage. However, there are some occasions that you have to pay a fee for the refinancing, which is not be more than 1% in the current outstanding balance and are not more than AED 10,000.

6. Negotiate Fees and Charges

There is always a possibility of bargaining most of the fees that are usually included in the mortgage deals. Some of the factors may be loan establishment fees, valuation fees, early settlement penalties among others. It is clear that other costs associated with a particular type of mortgage can be lowered by engaging in negotiations and so reduce the cost of the mortgage overall.

7. Maintain a Good Credit Profile

Credit worthiness affects the interest rate offered in the market in a very huge way. It means getting better rates or a better interest rate, which persons with better credits have always experienced. Always make sure to clear your debts on the due dates so that one can be able to have a good credit standing to qualify for the best rate on the mortgage.

8. Choose the Right Mortgage Term

The choice of the duration to be taken to completely pay for the mortgage is very crucial. However, shorter terms are associated with higher monthly payments and less total interest paid as compared to longer terms. On the other hand, short terms entails high monthly fees, but low interest fees as compared to long terms. Consider your ability to hand over the money to decide on the term that allows you to set the highest possible interest rate while keeping it affordable at the same time​.

By implementing these strategies, borrowers in Dubai can effectively minimize their mortgage costs and make homeownership more affordable. Always stay informed about market conditions and consult with financial advisors or mortgage brokers to make well-informed decisions.


How Can Borrowers Minimize Mortgage Costs?

1. What is the benefit of a fixed-rate mortgage?




2. How can borrowers reduce their mortgage interest costs over the loan term?




3. What is a key advantage of refinancing a mortgage?




4. Why is maintaining a good credit score important for mortgage borrowers?




5. What does an offset mortgage link to the mortgage to reduce interest costs?




Credits: 95Dubai.com

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