10 Tips for Getting the Best Interest Rate on Mortgage Loan

Best Interest Rate on Mortgage Loan

In recent years, the rates of mortgage loans have been increasing in the United Arab Emirates. For all those persons who want to purchase their own homes choose a mortgage loan to manage their finances. But, when you also decide to apply for it, you have to check the rates of mortgage loans and then select a lender that offers the funds at lower rates. Due to different financial market situations, it becomes difficult for you to get a loan or mortgage with the lowest rates. Therefore, in this blog, we will explain 10 tips for getting the best interest rate on your mortgage loan. All these tips are beneficial for availing a lower rate of loan and as a result, there is not much financial burden on you.   

Tips to get the Best Interest Rates on Mortgage Loans

There are so many factors that have a large impact on the interest rates of loans such as credit scores, down payments, etc. Some lenders also require the application’s processing fee, so when you avail of a loan with higher rates, it becomes costly for you when you pay down the amount. As compared to numerous other lenders, Karz’s interest rates of mortgages loans are not higher and it is without the need for any additional charges. Consider all the below-mentioned tips and then you will easily pay off the debt in lower monthly installments all over the tenure duration.     

Enhance Credit Score:

The easier and more prominent tip for the lower rates of loans for the purchasing of a new home is to enhance the credit score. The improvement in the credit score makes a good credit history and then the lender will trust more on you that you will always repay the installments constantly with no delay. All borrowers with low credit score do not avail of the higher loan amount easily and if they get the funds, the rates of repaying is also higher which becomes an expensive loan for the borrowers. When the credit score is more than 700, it is considered a good or high score. There is no complicated process of increasing this score in case of a bad score.

To improve credit score, repay the installments of existing loans or pay bills on time. Sometimes, there are chances of errors in the reports of credit scores. Therefore, check this report continuously and make sure it does not contain any errors.

Your Steady Employment Record:

The applications of applicants are only attracted to lenders if they provide proof of their steady employment record. Every applicant needs to show a record of their employment history. The salaried individuals easily attach the details of their working history through the bank statements but on the other hand, the self-employed also need to attach the record of their business. The lenders verify the employment details of the borrowers and if you are changing your job every few months, the lender gives you a loan but not with a low interest rate. However, if the unemployment is for a shorter time or due to a valid reason, you can explain it to the lender.

Enhance Income Stability:

The purpose of a lender’s checking of your income stability is that there are no fears of loan default during the repayment period. For income stability, you will need to make your proper budget and then spend your finances accordingly. It includes your spending of money towards debt repayments and also your monthly finances. The good idea is to spend your income per month less on non-essential things. It means that your first preference should only be on the payments of debt. With steady employment proof, you have to show the lender that your income is stable and enough to easily pay off the debt amount.     

Large Down Payment:

For all mortgage loans, the down payment is a basic criterion of every lender’s terms. Mostly, the lenders demand a 20% down payment and then approve the remaining loan amount. Karz also offers this debt with this percentage of down payment but its interest rate is also not higher and you will feel this debt is not too expensive. Some lenders also allow you to pay smaller down payments but their interest rate is not lower because you will need to spend more on the monthly installments with interest amount. When this payment is higher, the size of the mortgage debt is decreased and then it comes with a reasonable interest amount.     

Debt-to-income Ratio:

The understanding of this term debt-to-income ratio is very important when you want to avail it. In simpler words, the lenders compare the debt installments with your monthly income. Normally, when this ratio is lower, the lender provides you with a mortgage with a lower interest rate. Because they get surety that you will repay without any difficulty of finances and easily manage all other expenses also. When this ratio is higher, the affordability of debt repaying is not possible for many borrowers. That’s why the lender offers the debt at a higher rate. Every lender’s criterion of this ratio is also not similar, but commonly it should be 45%.        

Check Loan’s different Types & Terms:

The mortgage loans are in different types and with their specific terms. You have to check its different types and then choose which one is suitable for your needs. Some mortgages come with a repayment period of 15 years and other’s tenure is up to 30 years. Every month, you will pay the payments with the interest rate. The shorter period is with lowest cost of this rate in contrast to longer tenure. In addition, the lenders also offer loans with a repayment period of 5-7 years. For a shorter period, you will pay less on the repayments.      

Mortgage Points:

In particular, the mortgage points come with fees, so if you can afford this fee, then you should obtain these points with the paying of its fee. The fee is not much higher but you have to pay it when you get the loan amount. Every point of it decreases the interest amount. For instance, the 8% of the rate is reduced to 7.75% when you have points of four thousand AED. But all those borrowers who want to sell their house in a few years should not use this strategy because of not get the chance to recoup the upfront cost quickly.    

Compare Numerous Mortgage Lenders:  

The research of comparing numerous lenders must be your priority. In UAE’s financial market, there are so many lenders that provide the mortgage debts but every lender’s term of rate is different. Never select the lender quickly because you will need to check the terms of other lenders also. The bank where you have your account gives you a preference for approving your application without higher interest. But, still, you should contact different loan providers through online or offline mode and negotiate about the rates of interest. Make sure the fees of lending are not higher, so the loan is not too costly.

Lock in the Decided Rates:

 Generally, the lenders require time for the processing of the disbursal of the loan after the approval. When a borrower chooses a loan with a favorable uae mortgage rates, he should lock in the decided rate by contacting the lender. In this way, the situation of the financial market does not affect your selected rate. However, the using of this strategy requires paying of fee.

Lender Check Your Cash Reserves: 

Your cash reserves will give you a major benefit in that the lender will trust more on you. The loan provider knows that you will easily pay down even if you will face a situation of unemployment. The lenders check the borrower’s savings accounts and then decide the terms of monthly installments with interest rates. Always save your extra money to easily avail the debt at a lower rate.