Well, if you want to reduce the mortgage cost, to unlock the property equity or to consolidate the debts, consider streamlining your finance. But, whether or not a mortgage refinance suited for you depend on individual circumstances as refinancing offers are not always identical for every borrower. It carries great variants and has to be treading carefully to ensure the smart move. Here are a few factors to ponder, before applying for a home refinance.
Equity Value
In order to refinance the first disclaimer, you will need is equity in your home. Current bottom out of home sales price has left various homeowners underwater where they owe on par to the mortgage lenders than the property current market value. Attainment of refinancing facility with little or no equity is not possible until some extra contrivance added to the value in support to refinance.
Credit Report
Lenders have their own predefined benchmarks that decide the rates and terms of lending, along with the rate variations among salary transfer and non-salary transfer cases for expats and UAE nationals. And based on the credit reports and other qualifying criteria borrow gets eligible for the loan approval. The maximum loan to value and the interest rates deviates among different lenders. Hence, it’s equally important to have a watch on the credit report to get qualified for refinance.
Debt-to-Income Ratio
To calculate mortgagor’s loan aptness, the lender reviews credit report, gross income, and how much down payment (minimum 25 per cent) he/she can append to their purchase, and accordingly defines the debt-to-income ratios. However, the bank considers only 50 per cent of the monthly income to evaluate the loan qualification. Typically, considering, interest, principal and property insurance, it ought to 35 per cent or less of the total income. If you already have a mortgage loan, you may get the new loan easily. However, pay off some debt before refinancing application can increase your chance to qualify.
Refinancing Costs
Homes refinance usually costs, roughly 2 percent of the loan amount to homeowners, but borrowers can find several ways to reduce the costs or wrap them into the loan. Certainly, refinancing comes with an additional cost, but if we study it on a long-term structure, then it draws substantial savings and decreases that extra cost burden. If you have enough equity, you can roll the costs into your new loan by growing the principal amount.
Moreover, at present banks are flexible to oust the unnecessary exit charges which reduce the transaction cost and are offering easy on the pocket interest rates and terms, if transferring from one bank to other banks. So, never overlook to discuss and shop around, since some refinancing cost could be funded by the lender or abridged.
Rates and Term
It is important to form a goal when refinancing, as this will help you to determine which mortgage product meets your needs since, the mortgagor’s emphasis is on the interest rate only. If looking to reduce the monthly payments, then go with the lowest interest rate for the longer duration. And, if you wish to pay off the loan fast, then look for a mortgage with the short-term at the cost you can manage.
Mortgage refinancing requires a good due diligence on the part of homeowners. And at last, it’s up to the bank to decide whether you qualify for refinance or not. Lending parameters vary among lenders, so it might happen you qualify with some lenders and not so with others. So, shop around with banks and mortgage brokers to find the best deal, and use the incomes wisely.
If you need any assistance regarding mortgage refinance in Dubai, let our certified independent mortgage consultant help you to plan your investment in Dubai. 4C Mortgage Consultants provide best customized mortgage consultancy for a resale property, new purchase property, off plan purchase, construction mortgage, project finance, commercial mortgage, buyout, equity release, Non-UAE Resident, Debt Restructuring in Dubai. Follow us on Twitter, Facebook, and LinkedIn and keep yourself updated.