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Have you ever felt the need to change your mortgage lender, knowing there may be better, more affordable mortgage options out there with better terms? This inclination is only natural when you believe now is as good a time as any to refinance your current mortgage.

There are numerous benefits to be had through a mortgage refinance, the most notable one being more leeway to meet monthly payments. You can enjoy the lowest interest rates along with more flexible terms as long as you understand what benefits and stipulations your mortgage product offers.

Why consider refinancing
The recent US interest rate hikes have made many UAE residents consider mortgage refinancing; however, there are other valid reasons to consider:

. The Central Bank put a cap, as of December 2015, on how much banks can charge as exit fees. Banks are only permitted to charge one per cent of the outstanding principal balance up to a maximum Dh10,000, whichever one is less. This is a major development as it is applied retrospectively, even for mortgage customers who signed final mortgage offers stating three to per cent buy-out charges.

. Several UAE banks offer zero processing fees when you want to move your mortgage from another bank, so that you secure better rates as well as terms and conditions.

. If you took a mortgage before December 2013, you may be in a position to refinance up to 85 per cent of the property's current value.

. Historic contracts lacked transparency, therefore by refinancing, you are placed into a new contract which is more balanced and not entirely in favour of the lender.

. Interest rates have declined by 50 per cent since 2008.

Why it's good to refinance now
Homeowners can take advantage of the fierce competition among UAE banks to get discounted fixed-rate periods on their mortgage. It appears UAE banks are willing to be more generous when it comes to terms on existing loan exposures.

Things to consider
Many are not armed with the right knowledge before choosing a bank and product. There are over 100 mortgage products in the market, therefore, you should be well-equipped. Do your homework.

. When choosing any loan product, carefully read the fine print; specifically, the terms and conditions on interest rates, which have a tendency to change. Watch out for hidden fees and penalties.

. Look at all the fees and understand the full set-up costs, the rate and exit fees.

. Understand the rate as it is temporary and will rise as the years accumulate. Typically, the rates advertised are one-year fixed rates.

. Go with banks who link all their future rates to the Emirates Inter Bank Offered Rate (Eibor).

. Get everything in writing. If terms are promised over the phone or face to face, always ask for them in writing.
Negotiate with your bank

If your only goal in a refinance is to reduce your current interest rate, consider negotiating with your current bank for a rate reduction. Some banks offer rate restructuring which is a rate reduction to keep you from leaving the bank via a refinance. You can also negotiate with your bank to waive the refinancing fees.

Another option would be to consider a buy-out from one bank to another. Most banks would prefer to take over an existing loan with a history and track record of payments and deem this as less risk compared to a new loan. 

Consider a mortgage consultant
A mortgage consultant is the one person you can rely on to give non-biased advice on which loan is the best based on your circumstances. There is a better chance of renegotiating a better rate through a mortgage consultant due to their existing relationships with the banks.

Prominent mortgage consultants have access to exclusive offers from banks. So, you're saving on not only the rate but also on the loan.

The first thing you should look at when choosing a mortgage consultant is their CMB (certified mortgage broker) licence. If they do not have one, find one who does. Your advisor needs to be experienced and knowledgeable on both mortgage and real estate markets.

Equity release on property
If you own a property in the UAE with little or no mortgage, you can refinance property and take equity out. Equity release is provided by many UAE banks and is beneficial when seeking a fast and easy way to get cash to either buy more property, make home improvements or make your capital work harder.

For example, if you are paying a higher interest rate on your mortgage, you could do an equity release at a lower rate and pay the same monthly payment. These funds can be used for further investments which generate a higher rate of return. You can also take advantage of lower real estate prices and buy an investment property. Also, with the USD strength, it's a great time to take money out and send it abroad at a better exchange rate.

By: Lynnette Abad
Published in: http://www.khaleejtimes.com

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