Comparing the different mortgage rates in Dubai’s property market
If you’ve got a property on your mind, and are thinking about figuring out your finances - you might have already considered a mortgage.
So, if you’ve got a mortgage on your mind, you might be wondering just how mortgage rates work and how you can find the best property for your buck!
Let us break down the different types of mortgage rates, and what factors affect mortgage rates the most in Dubai.
What are mortgage rates?
In simple terms - Mortgage rates are the interest rates charged on a loan used to buy a property.
These rates affect how much interest you'll pay over the life of the loan and depend on factors like the economy, your credit score, loan amount, and loan term. Lower mortgage rates mean lower monthly payments and less interest paid over time.
What are the different types of mortgage rates in Dubai?
There are two types in Dubai that work for banks, fixed and variable.
Fixed-rate mortgage
Fixed-rate mortgages are usually a safer bet for first-time mortgage buyers, as with a fixed-rate mortgage, the interest rate you pay remains unchanged for a set period.
This stays unchanged typically between one and five years, after which you will transition to a reversion rate which is the interest rate that your mortgage 'reverts' to after your fixed rate mortgage period comes to an end.
Variable mortgage
A variable-rate mortgage is a rather fluctuating mortgage option, which can either rise or fall. The interest rate you pay is determined by the EIBOR (Emirates Interbank Offered Rate), which represents the rate at which banks lend to one another, together with a fixed percentage determined by your lender.
What affects mortgage rates in Dubai?
Multiple factors can play on mortgage rates changing in Dubai, these can be determined by things like:
1. Economy - The overall economic climate of Dubai can play a significant role in the rates, including inflation rates and economic growth. A strong economy may lead to higher rates, while a weaker economy might result in lower rates. Usually, rates are neutral and when compared globally, Dubai is considered quite affordable.
2. Central bank policies - The UAE Central Bank sets the base interest rates across the country, which directly impact mortgage rates offered by banks and financial institutions. If these are set to higher rates, buyers could look at higher interest rates.
3. Bank policies - Individual banks have different lending policies and their need to remain competitive in the market can cause variations in mortgage rates. So, it's always best to check different banks and their rates to ensure you get the best price.
4. Credit score - Commonly understood that a borrower’s credit history and score significantly influence the mortgage rate they can secure, so if you have a higher credit score it can typically result in lower rates.
5. Loan amount and term - The size and length of the mortgage can also affect the rate. Larger loans or longer terms might have different rates compared to smaller or shorter-term loans, some can be affordable while others can be shorter with higher interest rates.
6. Loan type - Fixed-rate mortgages often have different rates compared to variable-rate mortgages. Fixed-rate loans provide stability, while variable-rate loans can fluctuate with market conditions. So, understanding which loan type works for you beforehand can help in securing a mortgage faster.
7. Property value and location - When planning to get a mortgage, it's important to remember that the value and location of the property being mortgaged can impact the rate. Prime locations or properties in high-demand areas might attract better rates.
8. Down payment - The size of the down payment made by the borrower can influence the rate. Since the majority of down payments are at 20%, many borrowers pay larger down payments often resulting in lower mortgage rates as they reduce the lender’s risk.
Understanding these factors can help borrowers secure the best possible mortgage rate in Dubai.
How can you find the best mortgage rate for yourself?
Know that always speaking to a mortgage broker helps as they can guide you to finding what will work best for you. In order to obtain the best mortgage rates for yourself, there are a few steps you should follow:
1. Research different lenders - Start by researching various banks and financial institutions that offer mortgage loans in Dubai. Look into their interest rates, loan terms, and any additional fees.
2. Compare rates - We highly recommend using online comparison tools, such as a mortgage calculator to compare mortgage rates from different lenders. This will give you a clear idea of the current market rates and help you identify the most competitive offers.
3. Negotiate the terms - Don’t be afraid to negotiate with lenders. Sometimes, they can offer better rates or more favourable terms if you have a strong financial profile or if you’re willing to bundle other services.
By following these steps, you can find a mortgage rate that suits your financial goals and provides the best value for your investment in Dubai.
Thinking about your mortgage?
You could drop our in-house team of experts a line to understand mortgage rates in the market better, as well as find the right mortgage for you.