What mistakes should you avoid with your first mortgage?
Planning to get your first mortgage?
You might have a list of questions at hand, and we know just how daunting navigating the mortgage market for the first time can be, especially in a dynamic real estate space like Dubai!
Understanding the pitfalls that can slow you down on your path to securing a mortgage is crucial for first-time buyers.
We’ve broken down some of the most common mistakes to avoid when getting a mortgage in Dubai…
1. Overlooking the importance of a pre-approval
While house-hunting is definitely an exciting experience, many first-time buyers often make the mistake of starting their property search without getting any pre-approval for a mortgage.
This is important as a pre-approval not only gives you a clear idea of how much you can borrow but also positions you as a serious buyer in front of agents and sellers.
In Dubai's competitive market, sellers often prefer buyers who have already secured pre-approval from a lender. Plus with a pre-approval in hand, you already know how much you can aim for a property price making the overall experience of hunting for a property much easier.
2. Ensure you’re factoring in all the costs
While we know it can be easy to focus solely on the property's price, overlooking additional costs can lead to financial strain and an overall slowdown in your purchase time.
Similar to buying a car, buying a property comes with a set of costs associated with it. From insurance to property fees - it’s always important to be prepared for.
Costs can include Dubai Land Department (DLD) fees, mortgage registration fees, real estate agent commissions, and maintenance fees. It's always best to speak to a professional mortgage advisor and ensure you factor in these expenses when planning your budget to avoid unpleasant surprises later.
3. Choosing the right mortgage for you
Since Dubai offers a variety of mortgage products, including fixed-rate, variable-rate, and Islamic mortgages, it can be very confusing to select the one that’s right for you. In such cases, having a specialist on board can be very helpful. Selecting the wrong type can sometimes result in higher payments or financial stress. For example, a variable-rate mortgage might seem attractive during periods of low interest rates but could become expensive if rates increase. We suggest consulting with a mortgage advisor to determine the best option based on your financial situation and future plans.
Our in-house specialists can help you out, and you can also use our mortgage calculator to determine how much your mortgage can cost you monthly!
4. Not comparing lenders beforehand
Now one of the most important steps in obtaining a mortgage is working with a lender. In such cases, rushing into a mortgage agreement with the first lender you encounter is a common mistake many first-time home buyers make.
Here’s what we suggest you do - Since different banks offer varying interest rates, terms, and conditions, it’s always good to take the time to shop around and compare offers from multiple lenders to ensure you're getting the best deal.
Online mortgage comparison tools can be very useful too, as these help you prepare in advance. And if you are looking for the different types of lenders in the market, take a look at our guide.
5. A lack of pre-financial planning
We all know how exciting it can be to buy your own home, and seemingly many first-time buyers think that purchasing with a mortgage is much easier as the buyers are provided with funds from the bank.
Regardless, your current financial situation should be thoroughly assessed before applying for a mortgage.
This includes understanding your debt-to-income ratio, credit score, and overall financial health. Dubai lenders typically require a good credit score and a stable income when applying for a mortgage to gauge if you can pay back the lender on time and adequately. You should aim to reduce your existing debts and improve your credit rating before applying to increase your chances of approval and securing better interest rates.
6. Always read the fine print
Mortgage agreements can be complex and compressed with terms and conditions that are easy to overlook.
If you fail to read and understand these details, it can lead to unexpected penalties or fees. For instance, some mortgages in Dubai come with early repayment charges or other hidden fees. Always review the contract carefully and seek clarification on any points of confusion from your lender or legal advisor.
7. Underestimating the importance of a down payment
In Dubai, a typical down payment is around 20% for expatriates and 15% for UAE nationals.
While it might be tempting to secure a mortgage with a minimal down payment, this can lead to higher monthly payments and greater financial risk - A larger down payment, however, can reduce your loan amount, lower your interest rates, and make your mortgage more manageable in the long run.
While this seems a bit more daunting, it is better to have a higher down payment locked in, reducing the overall external fees that come with a mortgage.
8. Don’t skip out on professional advice
The Dubai real estate market is adorned with some of the world's finest properties, and navigating it without professional guidance can be confusing, especially when you are trying to obtain a mortgage.
In such cases, it is also necessary to engage with a reputable mortgage broker or real estate advisor who can provide invaluable insights and help you avoid common pitfalls. Additionally, they can also assist in finding the best mortgage deals, understanding the market trends, and ensuring all legalities are handled properly.
Thinking about obtaining your first mortgage?
If you’ve got a mortgage on your mind, drop us a line and our in-house experts will take care of the rest!