A remortgage is a very clever and simple move to help you save money. You may even wish to use the this to reduce or increase your mortgage term or reduce or increase the amount borrowed.
Taking a home loan is the biggest financial decision you make.Just acquiring mortgage will not save your money for sure, reviewing the cost of your mortgage regularly and take action to reduce them will save thousands of Dirhams. Remortgage will help in this case.
What is a remortgage or mortgage refinance?
A remortgage is a term where you raise a mortgage on a property that either is currently free of mortgage or has an existing mortgage and you switch to another lender who will “buy out” your existing debt.
Why do people tend to remortgage?
There are list of reasons why people tend to remortgage their property, but the ultimate reason why people look for its is to move to a better mortgage deal than the existing one. This may include a lower rate of interest or a repayment system, which may better suits your current finances.
When should you remortgage?
As I told you the main reason behind taking a remortgage is for the lower interest rate . Even if you make a move to a deal which offers an interest rate that is 0.5% less then this could save you thousands of dirhams across your mortgage term.
Reaching the end of your current dealings will give you an opportunity to search for new deals that suit your financial needs. If you are in fixed rate interest where your tenure time is not ended this is the right time to review for new deals offered by other banks. You need to do this about three months before tenure time ends that gives you ample time to compare with other deals.
If you’re on a variable rate mortgage, reviewing your mortgage once a year should ensure you remain on a good deal.
To evaluate your worthiness for remortgaging, you need to do some homework to know whether you can afford the cost of remortgaging, and start to save money, within a reasonable period of time.
These following factors will let you know whether it is worth or not to remortgage:
Compare mortgage interest rates
If you are at the end of the fixed rate interest mortgage, you are likely to search for a better deal in the market.
As a borrower, You may approach the existing bank for any better rates they offer to keep you as a customer If you get an offer, make sure to compare it against other deals online using best-buy charts or other sources of information.
Work out on your mortgage refinance costs
The remortgage is nowhere a cost-free service you are supposed to pay fees associated with taking out a new mortgage, So before opting a mortgage get knowledge of fee details and assess whether it’s worth remortgaging:
|Mortgage de-registration fee||AED 1,590|
|Property valuation fee||AED 2,500 – 3,000|
|Mortgage re-registration||0.25% of the mortgage amount, plus AED 290|
|Mortgage registration trustee fee||AED 2,000 for properties below 500,000; AED 4,000 for properties above 500,000 (+ 5% VAT)|
Know about exit penalties or mortgage prepayment charges
It is likely that you will be charged a penalty by the existing bank for exiting your mortgage early. On remortgage, the new bank will take on these costs by adding them to your mortgage(That is penalty plus the interest)
The UAE Central bank proclaimed that lenders can charge up to 3% (uncapped) to clients who exit their mortgage early. While the bank has to be able to prove financial loss to charge the full 3%, exit penalties can vary between different banks and mortgages.
So consider all these factors before stepping into remortgage and get a better deal on your mortgage that could save your thousands of dirhams
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